PASS ACTIVITIES

Facilitator: Lara Tufegdzic | 2020S1/W6 | BUSS1030 |

References: ‘Accounting, Business and Society’, 3rd ed., Atrill et al,
Pearson; Week 5 Lecture Slides.

PROPOSED AGENDA
1. Welcome (5 mins)
2. Activity 1: internal Control (15 mins)
3. Activity 2: Bank reconciliation (30 mins)
4. Close (5 mins)

LEARNING OUTCOMES
1. Identifying charactersitics, limiations and examples of internal control
2. Prepare a bank reconicilaition and the associated journal entries

Activity 1: Internal Control:

1. What are the 4 key components of internal control in practice:

- Control environment
- Risk assessment
- Control activities
- Info & communication
- Monitoring activities

2. List a few of the key challenges presented by e-commerce in internal control:

- Electronic transaction do not have a paper trail.
- Internal controls need to be inter-organisational.
- New elements of risk.
- Internet is a public network.
- Lack of technical expertise.
- Legal & technical issues.

3. List the limitations of internal control

- Cost <= expected benefit
- Human element (dishonest staff conduct, fraud, size of business)
- Dishonesty & judgement errors.
- Unexpected transactions.
- Management override – handling of situation (putting themselves first)
- Weak internal controls.

4. Briefly explain what a detective form of internal control means

- Identify problems that already exist.
- Instill procedures & policies consisting of constant (weekly, fortnightly or monthly) reviews of books & bank statemnts.
(accounting sector of the business would conduct this)
- Conduct an annual audit.
- Duty segregation of employees to efficient & honestly conduct their roles.
a. Preventative form.

Activity 2: Bank Reconciliation:

Use the following information to construct a bank reconciliation for Excel Industries Ltd for the month of August 2017.

As at August 31, Excel Industries Ltd had a Cash at Bank total of $35 000. However, the monthly bank statement showed a
balance of $33 100. Isaac, the business’ accountant, was very puzzled by this.
He investigated the difference in the balances and discovered the following:

DISCLAIMER: PASS materials have been developed by the PASS team using a range of resources. Unlike lecture and tutorial materials, the content has not been
developed in collaboration with lecturers and it does not have the status of “formal course content”. Rather, it is based on common questions from students and your
facilitator’s experiences. PASS materials are only intended for PASS sessions and are not to be taken to lecturers or tutors.  PASS material is not necessarily
representative of assessable/examinable content but does provide opportunities to deepen and apply your learning in specific unit of studies. For specific advice on
examinable content ALWAYS consult with your lecturers. The PASS team do not know what is on exams and cannot comment on assessable materials at any time. It is
not ethical for PASS facilitators to share their knowledge of the exams they have sat in the past, to advantage PASS participants against people who do not come to
PASS.  The PASS management team have instructed PASS facilitators not to provide such information at anytime.
 A deposit made by Maxwell, a customer, for $1 900 on 29 August has not shown up on the bank statement.
 A comparison of paid cheques and the bank statement revealed the following cheques had not been debited against
the bank account as at 31 August:
o #482: dated 29 August for $324
o #483: dated 30 August for $441
 The bank has a monthly service charge of $35.
 An EFT payment of $450 was made for electricity for the month, but it has not been recorded in the books.
 A cheque of $330 received from Rachel, a customer, was dishonoured.
 Excel Industries Ltd earned $50 of interest from the bank.

Excel Industries Ltd

Bank Reconciliation
As at 30 August 2016
BANK: Amount
Balance, 31 August 2016 33,100

Add: Customer deposit 1,900

Less: Outsanding cheque(#482) 324
Oustanding Cheque (#483) 441

Adjusted Bank Balance 34,235

BOOK:
Balance, 31 August 2016 35,000
Add: Interest from bank 50
Less: Bank Charge 35
EFT payment for electricity 450
Dishonoured Cheque 330
Adjusted Book Balance 34,235

Close

What is one thing you learnt today?

What is one thing you would like to revise further at home?
This week: Internal control, bank reconciliation
Next week: Statement of financial position
DISCLAIMER: PASS materials (e.g., activities/ questions/practice quizzes) have been developed by the PASS team using a range of resources. Unlike lecture and
tutorial materials, the content has not been developed in collaboration with lecturers and it does not have the status of “formal course content”. Rather, it is based on
common questions from students and your facilitator’s experiences. PASS materials are only intended for PASS sessions and are not to be taken to lecturers or
tutors. PASS material is not necessarily representative of assessable/examinable content but does provide opportunities to deepen and apply your learning in specific
unit of studies. For specific advice on examinable content ALWAYS consult with your lecturers. The PASS team do not know what is on exams and cannot comment on
assessable materials at any time. It is not ethical for PASS facilitators to share their knowledge of the exams they have sat in the past, to advantage PASS participants
against people who do not come to PASS.  The PASS management team have instructed PASS facilitators not to provide such information at anytime.