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The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Question 1
The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end. The bookkeeper is Jimmy Brown. REQUIRED: 1.1.1 Calculate the balance as pe... show full transcript
Worked Solution & Example Answer:The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Step 1
Provide a reason why Cheque No. 882 should not appear as an outstanding cheque. Also state how this transaction must be corrected.
Answer
Cheque No. 882 should not appear as an outstanding cheque because it was issued on 30 October 2015, and typically, outstanding cheques should be recent.
To correct this transaction, it should be voided in the accounting records and removed from outstanding cheque listings, ensuring that this amount is not included in future reconciliations. Additionally, if the cheque was not cashed, any necessary actions, such as reissuing or following up with the payee, should be undertaken.
Step 2
Cheque No. 1234 is post-dated. How must this cheque be treated at the end of the financial year?
Answer
Cheque No. 1234, being post-dated, means it will not be processed until after the year-end. Therefore, it should not be included as an outstanding cheque in the current financial year's reconciliation. It must be recorded in the financial statements as a commitment or note, ensuring that it will be acknowledged in the following financial period when it is cashed.
Step 3
Provide ONE control measure to prevent such incidents in future.
Answer
One effective control measure is to implement a dual control system for handling cash. This means that no single individual should have complete control over the cash handling process. For instance, requiring two signatures for cash disbursements and regular audits of cash transactions can help in minimizing the risk of theft and ensuring accountability.