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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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EXERCISE 7-3

Purpose: (L.O. 2, 3, 4) This exercise will help you understand the reasons for implementing a system of internal control. This exercise focuses on the one component of an internal control system—the control activities.

Family Grub, a large grocery store in Louisiana has a policy manual which contains the following guidelines:

___________ 1. Customers who pay by check must be identified via a store I.D. card or other means.
___________ 2. Store personnel are prohibited from accepting checks for anything except merchandise sales plus a nominal cash amount.
___________ 3. For each sale, a receipt is to be produced by the cash register and is to be given to the customer.
___________ 4. A reading of each cash register is to be taken periodically by an employee who is independent of the handling of cash receipts.
___________ 5. Cash counts are to be made on a surprise basis by an individual who is independent of the handling of cash receipts.
___________ 6. The reading of each cash register is to be compared regularly to the cash received.
___________ 7. A summary listing of cash register readings is to be prepared by an employee who is independent of personnel physically handling cash receipts.
___________ 8. Receipts are to be forwarded to an independent employee who makes the bank deposits.
___________ 9. Cash receipts are to be deposited in the company's bank account daily.
___________ 10. The summary listing of cash register receipts is to ...

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