Question

Each weekly pay period, a check is drawn on the general cash account and deposited to the payroll bank account in an amount "estimated" to be sufficient to cover the actual total of payroll checks issued that week. As a result, the payroll account runs a balance of several thousand dollars (non-interest-bearing), a situation that the newly hired treasurer has questioned. Which control plan would prevent this?

Answer 1

To prevent the payroll account from running a balance of several thousand dollars, a Just-In-Time payroll system should be implemented.

Step-by-step explanation:

The control plan that would prevent the payroll account from running a balance of several thousand dollars is to implement a Just-In-Time payroll system. In this system, the payroll bank account is funded with the exact amount needed to cover the actual total of payroll checks issued each week, rather than an estimated amount. This ensures that the payroll account does not have excess funds that are sitting idle, earning no interest. By implementing a Just-In-Time payroll system, the newly hired treasurer can optimize cash flow and improve the overall efficiency of the payroll process.