Question

 

a. A sales manager, who works on commission based on gross sales, approves credit and has the authority to write off uncollectible accounts. 

b. The warehouse clerk, who has custodial responsibility over inventory in the warehouse, updates the inventory subsidiary ledger and prepares an inventory summary for the general ledger department. 

c. The billing clerk bills customers and records sales in the sales journal

d. The shop foreman approves and submits time cards to timekeeping and distributes paychecks to employees. 

e. The accounting clerk posts to individual account receivable subsidiary accounts and performs the reconciliation of the subsidiary ledger and the general ledger control account. 

Answer 1

a.

Sales manager has the power to authorization as well as record keeping. 

Risk  --  manager may approve credit to a friend’s or relative’s business and then write off the account as bad.    

 

b.

Warehouse clerk has custodial responsibility as well as record keeping responsibility. 

Risk --  clerk may steal inventory and use his record keeping authority to adjust the inventory records to hide the theft. 

 

c.

No risks due to combining these tasks. 

Billing clerk is responsible for recording sales in the sales journal after they have been shipped to the customer

 

d.

Foreman has authority to authorize time cards and also has asset custody (the employee pay check).  

Risk --  supervisor may submit a false time card for a terminated or non-existent employee and then keep the paycheck that results.

e.

Accounting clerk both records transactions and verifies the accuracy of the recording. 

The Risk --  the accounting clerk may conceal errors or cover up balances that do not equal because of embezzlement of funds.