CCC8

CONTINUING COOKIE CHRONICLE

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 Johns 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 Johns 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 such as time as it can be deposited.
John should be responsible for the accounting function only. Natalie
(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 Cookie Creations. At a minimum,
Natalie and not John should prepare bank reconciliations monthly.

Copyright 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

8-1

CCC8 (Continued)
Part 1 (Continued)
(4)

(5)

The accounting records should be maintained on site and regular

back-ups should be prepared. It would be best if John used a
computer at Cookie Creations to prepare the accounting information;
however, if he is going to use his laptop, Natalie 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 Cookie Creations accounting, Natalie would still have
access to the companys accounting records.
John should submit a monthly invoice for the work he has done to
Natalie for her approval. Natalie should then write and sign the check.

Part 2
(a)
COOKIE CREATIONS
Bank Reconciliation
June 30, 2010
Cash balance per bank statement....................................
Add: Deposit in transit ......................................................
Bank error Check No. 603 ($452 $425)...........

$3,359
$110
27

Less: Outstanding checks ($238 + $297) .....................

Adjusted cash balance per bank .........................
Cash balance per books ......................................................
Less: Service charge...........................................................
Error in deposit June 20th ($155 $125)............
Telus .............................................................................
NSF check ($100 + $35 service charge) ............
Adjusted cash balance per books....................................

Copyright 2009 John Wiley & Sons, Inc.

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

$ 13
30
85
135

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

263
$2,961

(For Instructor Use Only)

8-2

CCC8 (Continued)
Part 2 (Continued)
(b) June 30 Bank Charge Expense.................................
Cash.............................................................

13

30 Teaching Revenue........................................
Cash.............................................................

30

30 Telephone Expense .....................................

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

85

30 Accounts ReceivableRon Black ..........

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

135

13

30

85

135

Check: $3,224 $13 $30 $85 $135

= $2,961 adjusted cash balance
(c) If a balance sheet were prepared, cash at June 30th, 2010 would be $2,961.

Copyright 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

8-3