Question

Shiny Happy Windows Co. (SHW) is a window cleaning company. Customers' windows are cleaned monthly, and the window cleaner then posts a stamped addressed envelope for payment through the customer's front door. SHW has a large number of receivable balances and these customers pay by cheque or cash, which is received in the stamped addressed envelopes by mail. The following procedures are applied to the cash received cycle: 1. A Junior clerk from the accounting department opens the mail, and if any cheques or cash have been sent, she records the receipts in the cash received log and then places all the monies into the locked cash box. 2. The contents of the cash box are counted each day, and every few days these sums are deposited at the bank by whichever member of the accounting team is available. 3. The cashier records the details of the cash received into the cash receipts journal and also updates the sales ledger, 4. Usually on a monthly basis, the cashier performs a bank reconciliation, which he then files. If he misses a month, he then catches this up in the following month's reconciliation Which of the following are deficiencies with this process? DOO A junior clerk from the accounting department opens the mail. When the mail is opened, any cheques or cash that have been sent are recorded in a cash log. Cash receipts are kept in a locked cash box The contents of the cash box are counted each day. Every few days cash receipts are deposited at the bank. The cashier records the details of the cash received into the cash receipts journal and also updates the sales ledger Usually on a monthly basis, the cashier performs a bank reconciliation, which he then files.

Answer 1

Role of Cashier and accountant should not be performed by same person. For the purpose of mitigating risk , segregation of duties should be applied as measure of internal control.

Work of one person (maker) should be supervised or checked by another person(Checker).Each person should be given some authorisation to perform his duties.Cashier should not given authorisation to record entry's in books of accounts likewise accountant should not be able to collect and payment cash from cash box available with cashier.

After reading the above case, following deficiencies come to the notice:

1.Junior clerk from accounting department opens the mails

Mail box contains stamped envolve which contains cash dues of customer which should be opened and record in cash receipt journal by Cashier and not the accountant .hence junior clerk from accounting department should not open the mail

2.​​​​​2.Cashier record the details of cash received into the cash receipt journal and also update the sales ledger

As far as recording the details of cash received into the cash receipt journal is concerned there is no deficiency in internal control of the organisation as it is the duty of Cashier to record and maintain the cash log but Cashier should not update or make changes or pass any entry in the books of accountsi i.e. passing journal entries ,update ledgers,etc. As it the job of accountant which he will perform after receiving from cashier the copy of cash receipt which is issued by Cashier to customer

3.Usually on a Monthly basis, cashier performs bank reconciliation which he then files

Performing Bank reconciliation is part of job responsibilities assigned to employees of accounting department and hence should be performed by authorised personnel only i.e. by Accountant and not the Cashier.