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Accounting Report. The aim of this report is to analyse the handling of cash, credit and inventories and outline the role that internal controls play in the business.

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Introduction

Date: 4th August 2011 Report to: Mr William Darcy Re: Internal Controls for cash, credit and inventories A close examination of your business practises shows that whilst a few of the practises in the operation of your store are correct, there are some that require significant attention. The aim of this report is to analyse the handling of cash, credit and inventories and outline the role that internal controls play in the business. Furthermore, I will provide appropriate recommendations both in terms of maintaining profit and functionality of your business. Internal controls are important, in that it encourages better control on almost all aspects of the business. It is categorized into two different factors: accounting controls and administrative controls. Accounting controls are steps taken to safeguard assets and promote accuracy and reliability in the business regarding the accounting data. ...read more.

Middle

Another factor that needs to be considered in an accounting system is correct documentation and acceptable recordkeeping, to ensure proper control of assets through appropriate procedures. Finally, safeguarding assets using methods such as secure areas to store inventories and cash, surveillance camera and fire protection is a necessary principle. A review of the business shows that a few of your practises are correct, such selling excess stock, since this practise will not only help with storage space but also the issue of declining profits. Also, Sarah the bookkeeper is carrying out appropriate steps, by completing thorough checks on the businesses and customers in regard to transactions and credit details, thus ensuring that occurrences of bad debts are prevented. This recording of transactions is supported by the principle of adequate recording. Moreover, by documenting the business?s transactions, ensures more accuracy. Although, the bookkeeper does practise appropriate methods in the business, there is a lack of proper distinguishing of duties. ...read more.

Conclusion

This will prevent the occurrence of fraud or theft. Moreover, when the new stock arrives, any staff member available is free to handle the stock. This is not a good business practice. According to the principles of internal controls, there should be proper authorisation needed to be implemented on particular tasks within the business. In other words, a qualified staff should be assigned the responsibility of handling new stock. It would benefit the business if there is a rotation of responsibilities relating to the handing of inventories such as ordering, recording, physical handling and storage. This practise would certainly ensure that any careless mistakes or dishonesty will be detected. In conclusion the above principles of internal controls needs to be fully implemented regarding the current issues concerning the cash, credit transactions and inventories. This not only will resolve any problems with the decline of profits or lack of policies or procedures in the business. Moreover, appropriate internal controls will encourage better performance from the staff members and the overall profitability of your store. ...read more.

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