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 good internal control mechanism for cash disbursements?

Allowing one employee to both authorize and record transactions

Requiring dual signatures on checks

Storing blank checks in an unlocked drawer

Making cash payments without supporting documentation

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Verified step by step guidance

Understand the concept of internal control mechanisms: Internal controls are processes and procedures implemented by a company to safeguard assets, ensure accurate financial reporting, and promote compliance with laws and regulations. For cash disbursements, internal controls are crucial to prevent fraud and errors.

Evaluate the options provided: Review each option to determine whether it aligns with the principles of strong internal controls. Strong internal controls typically involve segregation of duties, authorization procedures, documentation, and physical security.

Analyze the first option: 'Allowing one employee to both authorize and record transactions' violates the principle of segregation of duties. This creates an opportunity for fraud or errors, as one person has too much control over the process.

Analyze the second option: 'Requiring dual signatures on checks' is a good internal control mechanism. It ensures that two individuals must approve a disbursement, reducing the risk of unauthorized payments.

Analyze the remaining options: 'Storing blank checks in an unlocked drawer' and 'Making cash payments without supporting documentation' are poor practices. Blank checks should be stored securely to prevent misuse, and all cash payments should be supported by proper documentation to ensure accountability.