ACCOUNTING-Fraud experts often say that there are three primary factors
â Chapter 8
Answer each of the following
questions in your own words. (Do not plagiarize from the textbook or any
other source.) I want to see what you have learned in Chapter 8.
Question 1: C that contribute to employee fraud. Identify these three
factors and explain what is meant by each.
There are three main factors which
contribute to the employee fraud, these includes opportunity, financial
pressure and rationalization. Opportunity can be said when the employee takes
the advantage of the system as it lacks control. Financial pressure is when an
employee is in need of money and need more money which is not being covered by
his current salary. Rationalization is when the employees feel that they are
underpaid and claims that to be the reason of fraud.
Question 2. âInternal control is concerned only with enhancing the
accuracy of the accounting records.â Do you agree? Explain fully.
Internal control is not only
concerned with enhancing the accuracy but also concerned with the safeguarding
of the companyâs assets from threat, robbery and unauthorized use. Thus I do
not agree with the statement.
Question 3. At the corner grocery store, all sales clerks make change
out of one cash register drawer. Is this an internal control violation
for cash receipts? Why, or why not? Explain fully.
This case is considered as the volation
of internal control as per the principle of establishing responsibility. It is
important to have effective internal control for cash management, to ensure
this, the company should give all the sales clerks individual cash register
Questions 4. McCloud Fertilizer Co. owns the following assets at
the balance sheet date:
Cash in bank savings account
Cash on hand
Cash refund due from the IRS â¦â¦
Checking account balance
What amount should McCloud report as
âCashâ on the balance sheet? (Show your computation.)
8000 + 850+12000 = 20850
Questions 5. Lori Flagg is confused about the lack of agreement between
the cash balance in her companyâs general ledger account and the cash balance
according to the bank statement. Explain the causes for the lack of
agreement to Lori, and give an example of each cause.
The lack of agreement between the
bank balance and the cash balance occurs because of the time lag- example a
check written in march but cleared in april, error â Error in writing the check
amount like 265 written as 256, direct debits or credits by bank like bank service
expenses and charges,
On January 1, the Needcash Company establishes an imprest
petty cash fund by issuing a check for $400. On January 31, the custodian
of the petty cash fund submitted the following paid petty cash receipts for Frreplenishment
of the petty cash fund when there is $40
cash in the fund.
Owner’s IOU for lunch 25 (the owner, Dan Donahue, never pays
petty cash back)
Required: Prepare the general journal entries to:
A. Establish the fund
on January 1.
B. Replenish the fund on January 31.
C. Increase the petty cash fund to $500 on February 1.
Gas and oil
On September 30, the Lemon Company has a
cash balance per books of $10,608. The bank statement from the Valley
Bank on that date showed a balance of $17,004. A comparison of the
statement with the cash account revealed the following facts:
1. The statement included a debit memo of $60 for the
printing of additional company checks.
2. Cash sales of $845 on September 12, were deposited
in the bank. The cash receipts journal entry and the deposit slip were
incorrectly made for $854. The bank credited Lemon Company for the
3. Outstanding checks at September 30 totaled $6,225,
and deposits in transit were $1,225.
4. On September 18, the company issued check No.
1023 for $550 to M. Barker, on account. The check, which cleared the bank
in September, was incorrectly journalized and posted to Lemon Company for $505.
5. A $1,450 note receivable was collected by the bank
for Lemon Company on September 29 plus $75 interest. The bank charges a
collection fee of $15 for this collection service. No entries have been made
yet in Lemon’s records to show the note as collected or accrue the interest.
Using the bank
reconciliation form below, reconcile the bank statement of Lemon
When you have completed
the reconciliation, journalize the adjusting entries needed to correct
Lemon’s cash account in the general journal below.
Balance Per Bank
Statement, September 30
Per Bank, September 30
Balance Per Books,
Per Books, September 30
Cheque printing charges
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