The Cashier Diverted Cash Received Over the Counter from a Customer

question 59

Multiple Choice

The cashier diverted cash received over the counter from a customer to his own use and wrote off the receivable as a bad debt. Select the control that should have prevented the error.

• A) Receipts are given directly to the cashier by the person who opens the mail.
• B) Journal entries are approved by a responsible official.
• C) Remittance advices, letters or envelopes that accompany receipts are separated and given directly to the accounting department.
• D) Aging schedules of accounts receivable are prepared periodically and reviewed by a responsible official.

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Definitions:

Employee Discounts

Reductions in price offered to employees of a company as a benefit or perk, which can apply to products or services offered by the employer.

Net Markups

The amount by which the cost of a product is increased to arrive at the selling price, after accounting for any discounts or additional charges.

Net Markdowns

The total decrease in the original selling prices of products, accounting for promotions or clearance sales, minus any markdown cancellations.

Periodic Inventory System

An inventory accounting system where the inventory balance is updated and the cost of goods sold is calculated only at the end of each accounting period.