Short Essay Quiz – Essay Example
Quiz Describe the basic internal control rules for handling cash in a business. Where do you experience these rules with the businesses you deal with?
The first and most important step is to allow only specific people to handle cash. The second control measure is to give responsibility for of the bookkeeping to an individual who does not handle cash, this way there are less chances of laundering and mismanagement. In order to be more aware of inflows and outflows, one should use numbered receipts to document all payments. All bank payments should be made promptly. The bank reconciliation should be made by a different person from the one handling cash. . Lastly, deposits should be made intact with no amounts withdrawn to pay off expenses. At the newspaper chain, the internal auditor comes regularly unannounced, check the cash tills and verify the receipts
2- Imagine a business with a complex inventory, Home Depot, etc. Is it reasonable to believe that that store follows the rules of LIFO and FIFO in the majority of their products? Discuss the problems associated with this plan. Comment on at least one other persons posting.
Companies like Wal-Mart follow the LIFO plan for most of their inventory. This is because these organizations have peak sales almost all year round. This makes LIFO the most profitable method of inventory control system as COGS is high under this method leading to lower taxable income. The problem associated with this plan however is related to the problem of LIFO itself. When LIFO is used the inventory that has come in first might become obsolete and cause high cost in terms of loss due to scrap or damaged goods. With Companies like Wal-Mart and target carrying large inventories, this can cause higher costs and decreased profitability.
3 - Discuss the controls set up for returns and allowances in your favorite department store. What is required from you and how difficult is it to get your money
back after you have paid for something? Why is this necessary? What do you think of Chryslers new 90 day approval program when a new car is purchased? Do a Google search to see if this is real, or if the fine print makes it look better than it is.
The control measures applied for return policies in are that goods are to be returned within 7 days of purchase if the tag is still attached. Allowances are given on the basis of customer loyalty cards which hold a unique identity number to verify who gets what allowance on the basis of point system. Returning the merchandise is not so difficult if one has the original sales receipt and the clothes still have a tag on them. The Chrysler’s 90 day approval program is a myth and the fine print does make it look better than it is. There is no 90 day approval or refund program introduced by the company.