(Learning Objective 4: Evaluate internal control) The following situations describe two cash payment situations and two cash receipt situations. In each pair, one set of internal controls is better than the other. Evaluate the internal controls in each situation as strong or weak, and give the reason for your answer.
Cash payments:
a. Mark Moon Construction policy calls for construction supervisors to request the equipment needed for their jobs. The home office then purchases the equipment and has it shipped to the construction site.
b. Best Buildings, Inc., policy calls for project supervisors to purchase the equipment needed for jobs. The supervisors then submit the paid receipts to the home office for reimbursement. This policy enables supervisors to get the equipment quickly and keep construction jobs moving.
Cash receipts:
a. At Cunnigham Auto Parts, cash received by mail goes straight to the accountant, who debits Cash and credits Accounts Receivable to record the collections from customers. The Cunningham accountant then deposits the cash in the bank.
b. Cash received by mail at Healthy Heart Clinic goes to the mail room, where a mail clerk opens envelopes and totals the cash receipts for the day. The mail clerk forwards customer checks to the cashier for deposit in the bank and forwards the remittance slips to the accounting department for posting credits to customer accounts.