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

Several controls are used to safeguard inventory, and one of those is to:

Permit unrestricted access to inventory for all employees.

Separate the duties of receiving and recording inventory.

Allow the same employee to handle both purchasing and receiving.

Store inventory records in an unsecured location.

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Verified step by step guidance

Understand the purpose of internal controls: Internal controls are designed to safeguard assets, ensure accurate financial reporting, and promote operational efficiency. In the context of inventory, controls help prevent theft, fraud, and errors.

Analyze the options provided: Review each option critically to determine which aligns with the principles of effective internal controls. For example, permitting unrestricted access to inventory for all employees increases the risk of theft or mismanagement.

Focus on segregation of duties: Segregation of duties is a key principle in internal controls. It involves dividing responsibilities among different employees to reduce the risk of errors or fraud. For inventory, separating the duties of receiving and recording inventory ensures that no single employee has complete control over the process.

Evaluate the other options: Allowing the same employee to handle both purchasing and receiving creates a conflict of interest and increases the risk of fraud. Similarly, storing inventory records in an unsecured location compromises the security of sensitive information.

Conclude that the correct control is to separate the duties of receiving and recording inventory: This approach minimizes risks and ensures accountability in inventory management.