Financial accounting ifrs 3rd edition weygandt solutions manual

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MC7

MATCHA CREATIONS

Part 1 The weaknesses in internal accounting controls in the system recommended

by John are: (1) (2)

(3) (4)

The cash could be stolen from John’s vehicle before it is deposited in the bank.

John could potentially steal from the company and then cover the theft because of a lack of segregation of duties between the handling of cash, bank reconciling process, and recording of transactions in the accounting records.

The accounting information for the business could be lost or stolen if it is all stored on John’s laptop.

John should not be able to write checks to himself as this leaves the company vulnerable to theft.

Improvements should include the following: (1) (2)

(3)

Cash should be deposited in the bank daily. At a minimum cash should be locked in a safe until it can be deposited.

John should be responsible for the accounting function only. Mei-ling (or some other independent person) should sign all checks and make all deposits. Checks should be signed only when there is documentation present to support the payment. All invoices should be stamped “PAID” to avoid duplicate payment.

Bank reconciliations should be prepared by a person independent of the handling and recording of cash. However, this may not be possible in a small organization such as Matcha Creations. At a minimum, Mei-ling and not John should prepare bank reconciliations monthly.

_____________________________________________________________________________________________ Copyright © 2016 John Wiley & Sons, Inc. (For Instructor Use Only)

Weygandt Financial Accounting IFRS 3e Solutions to Matcha Creations

MC7 (Continued) Part 1 (Continued) (4)

(5)

The accounting records should be maintained on site and regular backups should be prepared. It would be best if John used a computer at Matcha Creations to prepare the accounting information; however, if he is going to use his laptop, Mei-ling should ensure that she is provided with a regular back-up of all the accounting records. This ensures that if John should ever lose his laptop or decide to no longer perform Matcha Creations’ accounting, Mei-ling would still have access to the company’s accounting records.

John should submit a monthly invoice for the work he has done to Meiling for her approval. Mei-ling should then write and sign the check.

Part 2 (a) MATCHA CREATIONS Bank Reconciliation June 30, 2018 Cash balance per bank statement ..............................

Add: Deposit in transit .............................................. NT$110 Bank error Check No. 603 (NT$452 – NT$425) 27 Less: Outstanding checks (NT$238 + NT$297) ........

Adjusted cash balance per bank .....................

Cash balance per books..............................................

Less: Service charge.................................................. NT$ 13 Error in deposit June 20th (NT$155 – NT$125) 30 Telus..................................................................

85 NSF check (NT$100 + NT$35 service charge) 135 Adjusted cash balance per books ..............................

NT$3,359 137 3,496 535 NT$2,961 NT$3,224

263 NT$2,961

_____________________________________________________________________________________________ Copyright © 2016 John Wiley & Sons, Inc. (For Instructor Use Only)

Weygandt Financial Accounting IFRS 3e Solutions to Matcha Creations

MC7 (Continued) Part 2 (Continued) (b) June 30 Miscellaneous Expense.........................

Cash ...................................................

13

30 Service Revenue ....................................

Cash ...................................................

30

30 Utilities Expense ....................................

Cash ...................................................

85

30 Accounts Receivable—Ron Black ........

Cash ...................................................

135

13 30 85 135

Check: NT$3,224 –NT $13 – NT$30 – NT$85 – NT$135 = NT$2,961 adjusted cash balance (c) If a statement of financial position were prepared, cash at June 30th, 2018 would be NT$2,961.

_____________________________________________________________________________________________ Copyright © 2016 John Wiley & Sons, Inc. (For Instructor Use Only)

Weygandt Financial Accounting IFRS 3e Solutions to Matcha Creations