Which of the Following Procedures Would Weaken Control Over Cash

question 164

Multiple Choice

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

• A) After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent.
• B) The bank reconciliation is prepared by a person who does not handle cash or record cash receipts.
• C) For safety, only one person should open the mail, and that person should immediately deposit the cash received in the bank.
• D) The cashier should not also be the record keeper who records the amounts received in the accounting records.
• E) All of these are good internal control procedures over cash receipts that arrive through the mail.

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Definitions:

Working Capital

The dollar difference between total current assets and total current liabilities.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Net Profit Margin

A profitability ratio calculated as net income divided by revenue, expressed as a percentage, indicating how much profit a company generates from its total sales.