Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

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 ...