Question

This a is a separation of duties exercise. Your small business client, Phillip's computer Repair Shop , is experiencing financial difficulties and has to lay off one of its four employees in the accounting area. Phillip has asked you to determine what duties should be assigned to the three remaining employees -Abigail, Bryan, and Chris- to maintain the best separation of duties.

Required: Assign the following 10 duties to each of the ten employees. a) Reconcile bank statement, b) Open mail and list checks, c) Prepare checks for Phillip's signature, d) Prepare payroll checks e) Maintain personnel records f) Prepare deposit and take to bank, g) Maintain petty cash, h) Maintain accounts receivable records, i ) Maintain general ledger j) Reconcile accounts receivable records to the general ledger account.

Answer 1

Duties can be allotted as under:

Duties	Abigail	Bryan	Chris
Reconcile bank statement	Y
Open mail and list checks	Y
Prepare checks for Phillip's signature			Y
Prepare payroll checks			Y
Maintain personnel records	Y
Prepare deposit and take to bank		Y
Maintain petty cash		Y
Maintain accounts receivable records		Y
Maintain general ledger	Y
Reconcile accounts receivable			Y

Explanation:

In allotment of duties following points are considered:

1. Maker-Checker rule: Work done by one person is to be checked by another person.

In the current case, bank transactions are allotted to Bryan and Chris. Bryan will take care of Petty cash, deposits and will maintain accounts receivable records (cash received from receivables will be recorded and deposited). Chris will look after payroll checks, taking signature on checks and will reconcile accounts receivables. Abigail is not involved in any of banking activities hence he will reconcile bank statement so that work of Bryan & Chris will get checked.

Bryan will maintain accounts receivable records and Chris will reconcile accounts receivables so work of Bryan will get checked.

Chris will prepare payroll checks and Abigail will maintain personnel records so work of Chris will get checked.

2. Allotment of same line of duties:

Bryan will look after accounts receivable records, he will also take care of deposits to bank. He will record cash received from receivables and will deposit also. He will take care of petty cash too. Looking to balance of petty cash he will make deposits to bank.

Chris will prepare payroll checks and will also look after preparing of checks for Phillip's signature. All the checks will be taken care of by him. He will be single point of contact for checks. Checks should be kept in safe place and authority should be given to one person only.