Question

Answer ALL the following questions on THIS FORM

(Use as many words and pages as you like)

FIRST QUESTION

Henri is the owner of the “Chez Henri” Restaurant. It is not a large restaurant (78 seats). For this reason, it does not have many people on the payroll. Henri has been handling the general manager’s responsibilities and has a good friend working half a day, five days a week, to take care of such matters as bank deposits, preparing accounts payable and payroll checks, and all other routine office and bookkeeping work.

Henri is not concerned about the honesty of the person, but he has learned from courses he has taken that any company, however small, needs to have some internal controls.

REQUIRED

1. Write a short report to Henri pointing out three specific areas where you believe controls might need to be implemented. For each of the three areas, advise Henri what might happen if a dishonest bookkeeper was hired and how internal control can be implemented to prevent dishonesty.
2. Henri would like to prepare the coming year restaurant budget himself. Please, help Henri understand the advantages of a flexible budget giving him some real-life practical examples.

Answer 1

Good Internal control System

It is well said that good internal control system are essential to assuring the completion of the goals and objectives. they provide reliable for the management decisions. good internal control system help to ensure effective and efficient operations that accomplish the objectives of the organization and also protect not even to the employees and also to the assets of the company.

-They provide reliable financial reporting for the management decisions.

-Time, wastage, can be control by the internal system and also help to improve the quality of the product.

- Work done by one is automatically and independently checked by the others is key to internal control system

-Internal control help to ensure that compliance are as per law and help to protect against the scandal

-A good internal control system increase the efficiency, increase the productivity, reduce the complexity of the processing transactions, it also help to reduce the time required to process transactions and add value to the concerns for the betterment.

-Internal control system are designed in such a way to safeguard the organizational's assets

-In addition control create a base for the effective reporting, effective operations, and compliance with laws and regulations.

There are five key elements of internal control

- it control the environment

- it assess the risk in advance

- it control the activities according to policy and procedure of the business operations.

-internal control provide good information and the communication.

-it monitor the system fro time to time for better control

The board can monitor the supervisory activities, the budget and all the other financial documents.

By doing all the activities better internal control can be developed and help to the firms not only in the short run but also in the long periods.

Advantages of Flexible Budget

A flexible budget will change each month. It considered more work at the begriming of the month , but allows the budget to adopt , such as unexpected expenses or fluctuations in the income .

A flexible budget uses the same selling and the cost assumptions as the original budget. it is an budget is a series of budget prepared for various levels of activities, revenue and the expenses.

There are various advantage or benefit to the flexible budget:

- Flexible budget react more quickly and better cost control , for example, if sale are $200,000 PER MONTH and labor cost was budgeted $50,000 per month then , it is 25% of sale and now if sale decline to $150,000 per month then labor cost should be reduce to $37,500 (25% of $150,000)

- It also time to time update the current data for revenue and expense and these are adjusted in flexible budget for current operating conditions.

- With the flexible budget , manager always update their projection and cost control with current information ,

- The main advantage of flexible budget is that it is over static one and ability to adopt changes in real world ,

- It also help to the management time to time to anticipate adverse condition and take advantage of expected opportunities

In the newly started business it becomes very difficult to predict the demand for product or services but flexible budget deals with these situation and provide result accurately