Question

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

Q1

1. Training, Training and More Training

A business is only as strong as its weakest link and that weak link shouldn't be your employees. Educating and training employees, tailored to their job-specific roles, is vital for improving overall workplace competency and reduce the likelihood of human error. This is especially important for employees dealing with mission critical data and technology. In this case, consider developing criteria for employee certification and test employees on their knowledge.

The biggest obstacle to training for most companies is the cost of and time allocated to training. If you put a different lens on, you'll see that the ROI for training, when it prevents catastrophic data loss and downtime, is huge.

2. Limit Access to Sensitive Systems

Mission critical data and technology that requires skilled labor to operate and maintain should be secure and accessed by only a few well-trained employees. Develop a badge or sign-in restriction for systems that are sensitive to error. Reducing the access to these systems will reduce the likelihood of human error.

3. Develop a Strong Disaster Recovery Plan

Developing a strong DR plan, where steps are taken to identify and mitigate potential risks, can help to ensure that all of your employees are on the same page with regards to preventing (or quickly addressing) human error. Make sure that employees handling the most delicate systems read and understand the DR Plan.

4. Test your Disaster Recovery Plan

So many companies fail to actively test their DR plan. To put disaster into perspective, have employees run through simulated human error disasters. This practice will allow you to both test your DR plan to ensure effectiveness, and conduct a real-life simulation for employee training purposes.

Additionally, testing your DR plan reiterates the importance of retaining data security business-wide.

5. Hold Semiannual or Annual Refresher Courses

It's not enough to hope that employees retain the information provided to them in the above efforts. These practices should be repeated with all employees on an annual or semiannual basis to ensure retention.

Repeated training sessions are also very important because policies and best practices may have changed based on current trends and technology. Always keep your training up to date by studying the latest best practices, or partner with a company who will provide detailed reporting of best practices in your industry.

The most important thing to remember when it comes to human error is that if you don't address a concern, the likelihood of error will increase. Communicating the policies and best practices to employees will help to create a conscientious workplace paradigm. The best scenario is when your employees start to educate and remind other employees of these policies and practices. Reducing human error is a group effort, and it starts with you

Q2

Dr uncollectable sales    3%

Cr allowance for doubtful sales 3%

The cash sales figure of $175,500 has not been taken into account while computing the allowance for doubtful accounts.

Q3

FIFO

units per unit total balance   

purchase 30 11 330 30*11=330

purchase 30 13 390 30*11=330

30*13=390

sold 50 30*11

20*13 590 10*13=130

LIFO

units per unit total balance   

purchase 30 11 330 30*11=330

purchase 30 13 390 30*11=330

30*13=390

sold 50 30*13

20*11 610 10*11=110

Weighted avg method

units per unit total balance   

purchase 30 11 330 30*11=330

purchase 30 13 390 30*11=330

30*13=330

sold 50 50*12 600

b)FIFO

cost of goods sold= 590

gross margin=750(50*15)-590=160

lifo

cost of goods sold=610

gross margin=750(50*15)-610=140

weighted avg

cost of goods sold=600

gross margin=750(50*15)-600=150

Q4)

Bank reconciliation is the procedure of comparing and matching figures from the accounting records against those shown on a bank statement. The result is that any transactions in the accounting records not found on the bank statement are said to be outstanding. Taking the balance on the bank statement adding the total of outstanding receipts less the total of the outstanding payments this new value should match to the balance of the accounting records.

Bank reconciliation lets companies or individuals to compare their account records to the bank's records of their account balance in order to expose any possible discrepancies. Discrepancies could contain: cheques recorded as a lesser amount than what was presented to the bank; money received but not lodged; or payments taken from the bank account without the business's knowledge. So, it becomes necessary to do bank reconciliation frequently.

After the alterations are made to the balance of the company's Cash account and to the balance per the bank statement, the two adjusted balances should agree. If they are the same, you have reconciled the bank statement.

Reasons for Preparing a Bank Reconciliation

There are several reasons for a company to prepare a bank reconciliation:

• To safeguard the company's cash. Performing a bank reconciliation results in improved internal control over the company's cash if the reconciliation is done by someone other than the person handling and/or recording receipts and payments. Having this additional person prepare the bank reconciliation reduces the odds of an improper use of the company's cash.
• To improve the confidence that the amount of cash that is reported on the company's balance sheet is accurate. The additions and deductions on the bank statement are compared (or reconciled) with the items that are entered in the company's general ledger Cash account. Some differences, such as outstanding checks and deposits in transit, are noted as simply timing differences.
• Since most companies use the double-entry system of accounting, any omission or error in the company's general ledger Cash account also means that at least one other general ledger account will have a corresponding omission or error. For example, if a company had wired money from its bank account for emergency computer maintenance services and had not recorded the credit to its Cash account, it is also omitting the debit to the account Computer Maintenance Expense. The bank reconciliation could prevent this omission from occurring.