MGT 2380-JKL Builder Ltd.’s policy calls for site supervisors

  

The following describe two cash payment situations and two cash receipt situations. In each pair, one set of internal controls is better than the other. Evaluate the internal controls in each situation as being either strong or weak, and give the reason for your answer.

Cash payments

1. a) JKL Builder Ltd.’s policy calls for site supervisors to request equipment needed for their jobs. Head office then purchases the equipment and has it shipped to the job site.
2. b) Big C Cement Co.’s policy calls for project supervisors to purchase the equipment needed for their jobs. The supervisors then submit the paid receipts to head office for reimbursement. This policy enables supervisors to get the equipment quickly and keep their jobs moving.

Cash receipts

1. a) At Big Al’s Car Rentals, cash received by mail goes straight to the accountant, who debits Cash and credits Accounts Receivable to record the collections from customers. Big Al’s accountant then deposits the cash in the bank.
2. b) Cash received by mail at Feel Good Physiotherapy Clinic goes to the mailroom, where a mail clerk opens envelopes and totals the cash receipts for the day. The mail clerk forwards customer cheques to the cashier for deposit in the bank and forwards the remittance slips to the accounting department for posting credits to customer accounts