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 cash receipts procedures represents an internal control strength according to the five components of internal controls?

Allowing the same employee to both receive and record cash receipts.

Failing to reconcile cash receipts with bank deposits regularly.

Segregating duties so that the employee who receives cash is not the same person who records the transaction.

Storing cash receipts in an unlocked drawer until the end of the week.

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Verified step by step guidance

Understand the concept of internal controls: Internal controls are processes and procedures implemented by an organization to ensure the accuracy and reliability of financial reporting, safeguard assets, and comply with laws and regulations. The five components of internal controls include control environment, risk assessment, control activities, information and communication, and monitoring.

Identify the principle of segregation of duties: Segregation of duties is a key internal control activity that ensures no single employee has control over all aspects of a financial transaction. This reduces the risk of errors and fraud by dividing responsibilities among different individuals.

Evaluate the options provided: Analyze each option to determine whether it aligns with the principle of segregation of duties and other internal control strengths. For example, allowing the same employee to receive and record cash receipts violates segregation of duties, while storing cash in an unlocked drawer compromises asset safeguarding.

Recognize the correct procedure: Segregating duties so that the employee who receives cash is not the same person who records the transaction is an internal control strength. This ensures accountability and reduces the risk of misappropriation or errors.

Apply the concept to real-world scenarios: Consider how segregation of duties can be implemented in practice, such as assigning different employees to handle cash receipts, record transactions, and reconcile bank deposits. This strengthens the organization's internal control system.