Question

Assignment Question(s):                                                      

Q1-

A company wants to implement good internal control. What are the policies and procedures you can suggest to minimize human frauds and errors? 

Q2-

Assume that you have a company. And the management team estimates that 3% of sales will be uncollectible.

Give any amount of sales and prepare the journal entry using the percent of sales method. 

Q3-

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.

January 1:	Purchased 30 units at SAR11 per unit
February 5:	Purchased 30 units at SAR 13 per unit
March 16:	Sold 50 Units for SAR 15 per unit

A.Prepare general journal entries to record the March 16 sale using the

1. FIFO inventory valuation method.
2. LIFO inventory valuation method.
3. Weighted average valuation method.

B. What is the cost of goods sold and the gross margin for each method? 

Q4. What is the bank reconciliation? why is it important for companies to prepare bank reconciliation periodically? 

Assignment Question(s):                                                      

Q1-

A company wants to implement good internal control. What are the policies and procedures you can suggest to minimize human frauds and errors?

Q2-

Assume that you have a company. And the management team estimates that 3% of sales will be uncollectible.

Give any amount of sales and prepare the journal entry using the percent of sales method. 

Q3-

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.

January 1:	Purchased 30 units at SAR11 per unit
February 5:	Purchased 30 units at SAR 13 per unit
March 16:	Sold 50 Units for SAR 15 per unit

A.Prepare general journal entries to record the March 16 sale using the

1. FIFO inventory valuation method.
2. LIFO inventory valuation method.
3. Weighted average valuation method.

B. What is the cost of goods sold and the gross margin for each method? 

Q4. What is the bank reconciliation? why is it important for companies to prepare bank reconciliation periodically? 

Answer 1

1.

Suggested policies & Procedures to avoid human frauds and errors:

• Segregation of duties
• Timely bank reconciliations and review by management
• Clear definition of Roles & Responsibilities
• Authorization of expenses or expense reimbursements
• Periodic and surprise verification of Cash balances
• Monitoring of Important activities
• Documentation at every level
• Physical verification of Inventory

2. Let we assume annual credit sales are SAR 100,000.

3% of 100,000 is 3,000.

Under percent of sales method, certain percentage of sales is estimated as uncollectible.

Journal entry is:

Dr. Uncollectible expense / Bad debts expense SAR 3,000

Cr. Allowance for doubtful debts SAR 3,000

3.

Jan1

Dr. Inventory - 330

Cr. Cash - 330

Feb 5

Dr. Inventory - 390

Cr. Cash - 390

A.

Mar16

Dr. Cash - 750

Cr. Sales - 750

Valuation Method	Journal	working	Debit	Credit	Sale Value	GROSS MARGIN (Sales-COGS)
FIFO	Cost of Goods Sold	30 @ 11 & 20 @ 13	590		750	160
	Inventory			590
LIFO	Cost of Goods Sold	30 @ 13 & 20 @ 11	610		750	140
	Inventory			610
WEIGHTED AVERAGE	Cost of Goods Sold	50*(330+390)/60	600		750	150
	Inventory			600

4.

Bank Reconciliation is the process of matching transactions regarding bank accounts from the books or accounting records to the cooresponding tranactions on the bank statements issued by the bank.

Bank reconciliation is important

• To identify descrapancies
• To catch fraud and manipulations and errors quickly
• To monitor the bank account to avoid the possibility of bounced cheques, failed payments