Essay Questions 122. Why would a merchandising company need good internal controls related to its inventory? List three of the key elements of an internal control system that would apply to...

Essay Questions

122. Why would a merchandising company need good internal controls related to its inventory? List three of the key elements of an internal control system that would apply to inventory, and explain how each of them does relate to inventory.

123. Mary Hobson operates a small gift shop that sells various antiques, such as glassware. She employs two clerks who make sales to customers, accept returns when a customer is dissatisfied with merchandise, and put new merchandise on display. One of the clerks, Jill Hays, was hired recently. Mary had always done all the accounting for the store and had made bank deposits. However, Jill has offered to do the accounting for the store during slow periods when there are no customers in the store; she also has begun making bank deposits as she leaves for the day. Having Jill take these responsibilities allows Mary more time for acquiring merchandise for the store and for personal errands. What potential risks for the success of Mary's business are present in this situation?

124. One of your friends is preparing to open a store that will sell greeting cards and stationery. When you heard that the business would have three or four employees, you told your friend that she would need to pay careful attention to separation of duties. She has asked you to explain what duties should be separated and why separation of duties is important in a business. Write a note to your friend explaining these issues.