Internal Controls
Admin Controls
Credit Controls
Cash Controls 1
Accounts Receivables
100
True or False? Internal Controls are ONLY implemented in a business to prevent fraud?
False, internal controls are ALSO implemented to: prevent errors being made in the first instance, detecting errors and increasing efficiency.
100
What TERM is used to describe when duties of personnel are separated so that the work of one employee acts as a check on the work performed by another?
Division of duties.
100
When an agreement is made between a business and a customer to buy goods and pay for at a later date, the business is offering a WHAT facility?
Credit Facility
100
Why is it important to keep cancelled cheques and receipts?
They are needed for auditing purposes.
100
What is the benefit of providing credit to an accounts receivable?
To increase sales as they would buy more with the convenience of paying back later.
200
Would the use of prenumbered source documents be an example of a sound accounting practice?
Yes, and other examples would be using a chart of accounts and use of comparative analysis. to aid internal control in a business
200
What are you safeguarding when you practice "Physical Controls" ?
Financial records and assets
200
Why would offering a credit facility be costly for a business?
1) The cost of stationery or telephone to send out invoices, requests for payment, etc. 2) The costs of wages for someone to maintain this account ensuring the payments are eventually made. 3) Bad debts resulting from account recivable not paying their debts.
200
It is wise to have the same person who receives money be the person who entered the details and also banks the money. True or False? What Internal Control should you implement?
False, division of duties should be implemented to separate those who handle cash from those who record cash AND those who bank the cash. The CASHIER cannot be the ACCOUNTANT and the ACCOUNTANT cannot be the BANKER.
200
The accounts receivable subsidiary ledger needs to be balanced with WHAT account in the WHAT ledger?
The CONTROL account in the GENERAL ledger. By having different staff resposible for preparing the subsidiary ledger and the general ledger, the possibility of fraud is kept to a minimum.
300
What TERM would you call an independent review of a business's accounting practices and procedures in order to decide whether the financial records represent a true and fair statement of the activities.
This is called an AUDIT
300
What term encapsulates an effective system of training qualified employees with clear and consise job descriptions to perform their jobs responsibly and carefully whilst implementing aspects of the accounting system.
Personnel policies
300
An outline of the following can be found in a WHAT policy? * Maximum credit limits * Terms of payment * terms of interest * Collection procedures
Credit Policy
300
All cash received daily should be banked on Fridays so that the cash is in the bank before the weekend. True or False
False, all cash should be banked intact daily.
300
Each month WHAT is is prepared and sent out that details each transaction involving each accounts receivable?
A statement of account.
400
Are auditors internal or external to the business?
They can be both.
400
Name 2 reasons why the practice of rotation of duties is beneficial for internal control?
1) Employees benefit from multiskilling and the company benefits by having staff who are flexible workers. 2) Employees are discouraged from committing fraud if they know that someone will soon be performing their job.
400
What is creditworthiness?
When a business ascertains whether they should grant credit to a customer by determining whether the customer will pay in a timely manner.
400
A business will perform a bank reconciliation to ensure that a business cash at bank account matches with the bank's statements. True or False?
True
400
Explain what an "aged analysis of account receivable" is.
An aged analysis of accounts receivable is a list of accounts receivable balances classified according to the time period the debt has been outstanding.
500
What are the 2 practices of internal accounting controls?
Sound accounting practices and auditing.
500
What are the 5 practices of internal administration controls
Division of duties, rotation of duties, physical controls, personnel policies and integrity controls.
500
A customer's payment history is changing. They used to be on time but now their payments are sporadic and less than the required amounts. 1) Would this effect their creditworthiness? 2) What would you do about it?
Yes it would effect their creditworthiness. You would contact the customer and discuss any issues they may be having with their cash flow and, if neccessary, work out a payment plan.
500
What is the best way to pay for small items such as staffroom milk, coffee, stamps, etc. You would use this when the items are so small that a writing a cheque would be considered unneccessary.
Petty Cash. The petty cash is usually kept in a lockable container and consists of small amounts of money that is distributed for small items and must be replaced with receipts. The funds are reimbursed up to several stages within a month and always accounted for at end-of-period reports.
500
When you don't get paid and you are considering outsourcing someone to chase your debts, what things should you consider when making the decision to outsource or not outsource?
What is the cost of my staff chasing up debts? What is the fee to use an agent? Is it really worth it? It might cost you more to chase the debt than what the debt is worth.
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