Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

Financial Accounting

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

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Multiple Choice

Which of the following is a principle of internal control as defined by the five components of internal controls?

Maximizing net income

Increasing sales revenue

Segregation of duties

Reducing tax liability

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Verified step by step guidance

Understand the concept of internal control: Internal control refers to the processes and procedures implemented by an organization to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations.

Learn about the five components of internal control: These include Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities. Each component plays a critical role in maintaining effective internal controls.

Focus on the principle of 'Segregation of Duties': Segregation of duties is a key control activity that involves dividing responsibilities among different individuals to reduce the risk of errors or fraud. For example, the person responsible for recording transactions should not be the same person responsible for authorizing or reconciling them.

Evaluate the options provided in the question: 'Maximizing net income,' 'Increasing sales revenue,' and 'Reducing tax liability' are not principles of internal control. These are business objectives or financial goals, not control activities.

Conclude that 'Segregation of Duties' is the correct answer: It is a recognized principle of internal control that aligns with the five components and helps ensure the integrity of financial processes.