Internal Control and Bank Reconciliations/Problems 8-1A and 8-3A
Karena Busch
ACC/225: Financial Accounting
April 24, 2011
Madonna Akins-Box

Internal Control and Bank Reconciliations/Problems 8-1A and 8-3A
Problem 8-1A: Analyzing Internal Control. 1. The principle of internal control that is violated would be that there should be separate record keeping and custody over the assets, since Heather handles the cash receipts from the customers, someone else should do the recording to their accounts. 2. The principle of internal control that is violated is that no one has established responsibility to one another. Jeff and Jose need to divide responsibility for each related transaction. They should count the cash register when Jeff goes to lunch and once again when he returns from lunch, that way it is known what is paid out, to who it is paid to, and to be confident the books will balance correctly during Jose’s shift. 3. The principle of internal control that is violated is the “asset” is not safeguarded. When Nadine backed up the computerized accounting system to a tape, she needs to store this in a separate location/room and not in the same location/room; in case anything should happen to that location/room. 4. The principle of internal control that is violated is that Barto Sayles is not performing regular and independent reviews. Barto needs to perform regular, unannounced reviews, and bond his employees to make sure his employees are following his rules and instructions and that the controls are being adhered to. 5. The principle of internal control that is being violated, are just like #2, responsibilities are not being established; along with Desi is not bonding her employees. Her Manager should of made the decision to raise the deductible, not her and she should of not dropped the bonding of employees just because they have not experienced any losses, she never knows when they will experience loss.

Problem 8-3A: Establish, reimburse, and increase petty cash.

1. Prepare the journal entry to establish the petty cash fund.

Feb 2. Petty Cash……………………………………$300.00 Cash……………………………………………………………$300.00 (To establish a petty cash fund)

2(a). Prepare a petty cash payments report for February with these categories: delivery expense, mileage expense, postage expense, merchandise inventory (for transportation-in), and office supplies expense. (b). Sort the payments in the appropriate categories and total the expenditures in each category.

Inoke Gallery
Petty Cash Payments Report
2(a).
Feb 5. Office Supplies Expense……………… $10.13 9. Merchandise Inventory…………………..22.50 (COD shipping charge) 12. Postage Expense……………………… ….9.95 14. Mileage Expense (Ali Buck)……………..58.00 20. Office Supplies Expense………………….77.76 23. Delivery Expense………………………….18.00 25. Merchandise Inventory……………………15.10 (COD shipping charge) 27. Postage Expense…………………………..64.00 Total………………………………….$275.44 28. (The fund had $21.23 remaining in the petty cash box. Sorted the petty cash receipts by accounts affected and exchanged them for a check to reimburse the fund for expenditures. The fund amount is also increased to $40.00)

2(b). Office Supplies Expense………………………..$91.22 Merchandise Inventory…………………………..37.60 Postage Expense………………………………....73.95 Mileage Expense………………………………...58.00 Delivery Expense………………………………..18.00 Total………………………………………….$278.77

3. Journal entries to reimburse and increase the fund amount.
Reimburse the fund amount: Office Supplies Expense (DR)……………………….$91.22 Merchandise Inventory (DR)………………………….37.60 Postage Expense (DR)…………………………………73.95 Mileage Expense (DR)…………………………………58.00 Delivery Expense (DR)………………………………...18.00 Petty Cash (CR)………………………………………………$278.77

Increase the fund amount: Petty Cash (DR)…………………………………….. .$378.77 Cash (CR)…………………………………………………….$378.77 (To reimburse $278.77 and increase the fund to $400.00)