Question

internal Control of Cash Payments Abbe Co. is a small merchandising company with a manual accounting system. An investigation revealed that in spite of a sufficient bank balance, a significant amount of available cash discounts had been lost because of failure to make timely payments. In addition, it was discovered that the invoices for several purchases had been paid twice. Indicate whether the procedures listed below for the payment of vendors' invoices would reduce the possibility of losing available cash discounts and of paying an invoice a second time.

Answer 1

Here the given information in the question is

1. Abbe co having manual accounting systems.

2. Due to insufficient bank balance organization lost many cash discounts.

3. Several invoices are paid twice .

So by observing all the above points we came to know that there is a need to implement internal controls in accounting and paying the invoices.

We make controls for we each of the problem one by one.

1. To avoid the non payments of invoices with in the time for avoiding the loss of cash discounts at any time the cash is not available at organization better to take debts from banks for temporary usage and get cash discounts.

2. And other reason for losing the cash discounts is double payment of the invoices if we control this issue we get more cash in bussiness to pay off our invoices with in time and get cash discounts.

3 .Control should be implemented in maintaining invoices maintain all paid invoices and unpaid invoices in seperate. by this we can make some distinction between invoices.

4. Put a paid symbol on all paid invoices so that we can avoid the double payment.

5. Maintain honest employees to avoid cash imbalances.

6. By this maintaining distinction between the paid and unpaid invoices we can save som money from double payments.

7. The money saved from avoiding double payments we can make other invoices paid with in time and grab the cash discounts.

These are all the points and controls relating to the above question.

I hope, all the above mentioned points are helpful to you.

Thank you.