questions 1-2

Problem 7 At the Divinity Hotel, a 150-room property, the procedure for handling checks returned by the bank marked "insufficient funds" was to carry them as part of the bank balance. That is, when the bank returned a check because payment was refused and charged it to the hotel's account, no entry was made in the books. The returned check was immediately redeposited, and the bank usually collected it. At the end of the month, those checks that had not been collected were treated as reconciling items (NSF checks) by the bookkeeper preparing the bank reconciliation. If the check was later collected, the bookkeeper made no formal entry, however, in preparing the next month's bank reconciliation, the bookkeeper reduced the amount of NSF checks. If the check was still uncollectible after three months, a journal entry was recorded charging "Bad Debt Expense" and crediting "Cash in Bank." Required: 1. Explain any deficiencies in the Divinity Hotel's cash control system. 2. Provide the manager with suggestions for improving the system