Question

Bolz Office Supply Company recently changed its system of internal control over cash disbursements. The system includes the following features. Instead of being unnumbered and manually prepared, all checks must now be prenumbered and prepared by using the new payroll software purchased by the company. Before a check can be issued, each invoice must have the approval of Kathy Moon, the purchasing agent, and Robin Self, the receiving department supervisor. Checks must be signed by either Jennifer Edwards, the treasurer, or Rich Woodruff, the assistant treasurer. Before signing a check, the signer is expected to compare the amount of the check with the amount on the invoice. After signing a check, the signer stomps the invoice PAID and inserts (within the stamp) the date, check number, and amount of the check. The "paid" invoice is then sent to the accounting department for recording. Blank checks are stored in a safe in the treasurer's office. The combination to the safe is known only by the treasurer and assistant treasurer. Each month, the bank statement is reconciled with the bank balance per books by the assistant chief accountant. All employees who handle or account for cash are bonded. Identify the internal control principles and their application to cash disbursements of Bolz Office Supply Company.

Answer 1

Establishment of responsibility - solely money handler and associate accountant are authorized to sign the payments

Segregation of duties - Bills should be permitted by each the agent and also the receiving division supervisor. Disbursement may be created by the money handler or associate accountant and also the payment signers don't record the money expenditure transactions.

Documentation procedures - Payments are renumbered. Subsequent disbursement, bills are sealed PAID

Physical Controls - Blank cheques are unbroken in a very safe within the accountants workplace. Only the money handler and associate accountant have admittance to the safe. A cheque writing device is employed in writing cheques.