Hello everyone,

Why should the responsibility for maintaining the accounting records be separated from the responsibility for operations? Why?

According to the eBook for WarrenJonickSchneiders Financial Accounting, companies should separate operations, custody of assets, and accounting processes in order to have accounting records serve as an independent check on the operating managers and the employees who have custody of the assets. Separating responsibility decreases the possibility of abuses within the company such as placing orders based upon friendship rather than on objective factors, failure to verify the quality and quantity of goods received and the related payment, employee theft, and verifying the validity and accuracy of company invoices. The e-book resource includes the following supporting examples of why separating operations is important. Employees who handle all aspects of handling cash could, borrow or steal cash and hide the theft in the accounting records. In addition, operating managers who record the results of operations could personally benefit from distorting the reports to show favorable results.

All of the resources provided for this class support the overall theme of internal control through controlled environment, risk assessment, control procedure, effective monitoring and clear, up-to-date information and communication.

What topic did you find difficult to understand in this chapter?

This chapter emphasizes internal controls, talks about safeguarding assets, recording accurate information, and complying with laws and regulations. The material describes the need to control cash and cash transactions, citing the reason being that cash is the asset most likely to be stolen or used improperly. SoI find the practice of using a cash short or over to force balance a petty cash fund incongruent with the theme of control the cash. It seems to me that abuses can occur with the petty cash fund as easily as with any other cash transaction. I always have questions about the material and wonder how many businesses actually use a cash short or over to force balance their petty cash fund.

Thanks for reading,

Rachel M.

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