The paper “ Keiner Merchandising Company Net Profit" is a thoughtful example of an assignment on finance & accounting. The main purpose of the internal control procedures is to ensure that an organization’ s operations comply with the quality assurance standards of a firm. The objective is achieved through the maintenance of internal controls, which constitute peer reviews of financial statements and continuous performance appraisals. Record keeping of a firm’ s assets should be separated from the custody of the same assets to avoid temptations of fraud in the safeguarding of assets. The separation is vital because of the value attached to internal controls and oversight roles of involved staff. The responsibility of a transaction must be given to more than one party in order to ensure accountability.
The move is one of the internal control measures within a firm, which prevents fraud. It is easy to trace persons responsible for fraudulent conduct when two or more parties are involved in a transaction especially the material requisition transaction. The items included in the cash equivalents category include cash, checks, recovery of debts and petty cash. Liquidity refers to the ability of an organization to meet both its short-term and long-term cash commitments. A good internal control system enhances protection for the cash receipt and disbursements through a separation of duties, performance appraisal, and total quality management.
Disbursement of cash requires the segregation of duties, review of authorized signors, and requisition of dual signors and the reconciliation of bank accounts in good time. The internal control ignored in the case of Franco Company is the segregation of duties. The same person authorizing checks for the company should not perform the record-keeping function.
Segregation of duties could have prevented such embezzlement of the fund, $18400. The perpetual inventory system is reliable. First-In-First out system ensures that old stock is sod before new stock is sold. Sales =350 units Closing stock =150 units Opening inventory =320 units$3 Purchases (p1) = 80 units $3.2 Purchases (p2) = 100 units $3.34 FIFO method: Sales 320 units $3 Sales 30 units $3.2 For the purchases (p1) closing stock accounts for 50 units @3 = $150 For the purchases (p2) closing stock accounts for 100 units @ $3.2 =$320 The cost of closing stock using FIFO =$ (150+320) = $ 470 LIFO method: Sales 100 units @$3.34 80 units @$3.2 170 units @ $3 The closing stock will account for 150 units@$3=$450 Weighted average method: Closing stock will account for 150 units @ weighted average price Weighted average price=(3.34+3.2+3)/3= $3.18 Closing stock cost=(150 x 3.18 =$477 Harris Company is the consignor and Harlow Company is the consignee.
The consignee, Harlow Company has the right to include other goods as part of the stock. Harlow Company should include the consignment of $12500 goods o transit as part of its closing inventory. Merchandise inventory includes goods ready for sale. Nov. 5th Dr. Purchases account $6000(600x10) Cr.
Creditors account $6000 Nov. 7th Dr. Creditors account $250 Cr. Purchases account $250 Nov. 11th Dr. Creditors account $5750 Cr. Cash account $5750 April 1st Dr. Debtors account $3000 Cr. Sales account $3000 Dr. Profit and loss account $ 1200(3000-1800) Cr. Sales $1200 April 4th Dr. Sales account $600 Cr. Debtors account $600 Dr. Sales account $240 Cr. Profit and loss account $240