Accounting System and Processes - ACC101 Homework Solution

This assignment solution addresses various aspects of accounting systems and processes, using the case study of "Little Red Riding." It begins by providing solutions to questions related to retail operations, inventory management, and the recording of financial transactions. The solution then delves into the importance of internal controls, discussing risks like employee theft and methods for mitigating them. A detailed letter explaining a bank reconciliation statement is included, along with a discussion of depreciation methods for business assets like trucks. The assignment emphasizes the practical application of accounting principles and the importance of sound financial management in a retail environment.

Running head: ACCOUNTING SYSTEM AND PROCESSES
Accounting System and Processes
Name of the Student:
Name of the University:
Author’s Note

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ACCOUNTING SYSTEM AND PROCESSES
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................7
Answer to Question 3....................................................................................................................11
Introduction................................................................................................................................11
Discussion..................................................................................................................................11
Internal Control and its Importance...........................................................................................11
Threat of Employee Theft..........................................................................................................12
Three Possible Ways of Cash or Inventory Loss.......................................................................13
Implementation of Measures.....................................................................................................13
Conclusion.................................................................................................................................15
Answer to Question 4....................................................................................................................15
Reference.......................................................................................................................................18

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ACCOUNTING SYSTEM AND PROCESSES
Answer to Question 1
Part i
Part ii

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Part iii

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Part iv
Part v

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Answer to Question 2
Part i
To Mr. and Mrs. Wheeler
Little Red Riding
23/09/2019
Dear Mr. and Mrs. Wheeler
Subject: Overview of a Bank Reconciliation Statement
I am writing this letter to inform you that Bank Reconciliation statement has been prepared and
also explain to you the fact the Bank Reconciliation statement. There are certain situations in
which the bank reconciliation statements do not always match which may be due to the
differences in the passbook entries or bank statements. If some entries are not recorded or
omitted than the same would bring about inconsistency between the bank statement and the
books of accounts which is maintained by the business. A bank reconciliation statement is
prepared for the purpose of appropriately summarizing the banking transactions and the financial
records. The bank reconciliation identifies any misstatement or omission and keeps both the
books updated. The bank reconciliation statement effectively considers the transactions which
can affect the consistency in the books of accounts (Kaplan & Atkinson, 2015). The statement
also highlights certain transactions such as withdrawals and deposits, omission of which can
affect both the books of accounts. The purpose of preparing a Bank Reconciliation statement is

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ACCOUNTING SYSTEM AND PROCESSES
to match the bank column of the cash book with the passbook which is maintained by the bank.
This ensures that the consistency is maintained and both the books are updated. The main
reasons which can be identified for the difference in the Bank Reconciliation statement are listed
below in details:
 Outstanding Cheques
 Deposit which is in transit
 Banking service charges
 Errors made by the accountant in the books
 Errors made by bank
 Interest received not recorded in the books of accounts of the business.
The Bank Reconciliation statement considers the effect of any errors or omission which
might have an impact on the books of accounts of the business and reverses the same
appropriately. The Bank Reconciliation statement helps the business to keep a track of cash
balance which is at bank.
Thanking You
Accounting Executive
Part ii

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Part iii

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Part iv

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Answer to Question 3
Introduction
The main purpose of the assessment is to analyze the importance of an appropriate
internal control system in a business and how the same help the management of the company to
prepare appropriate records for the management of the company. The business of Little Red
Riding is considered for the analysis of the efficiency of the internal control of the business
(Fullerton, Kennedy & Widener, 2014). The internal control of the business for inventory and
cash system are considered for assessing the risks which are associated with the business.
Discussion
Internal Control and its Importance
Internal control refers to the internal procedures and processes which is followed by a
business for ensuring that proper control is maintained in the organization. The internal control
of a business is set by the business in order to exercise proper control over the operations of the
business. The internal control of a business effectively helps the business to set procedures and
establish a proper framework which is to be followed by the management for effective control in