Discussion Questions: Please answer the following two questions separately. Quoted material is not allowed. Please write the answer in your own words. One paragraph for each question.
1. What is internal control, and what are the objectives of
a good internal control structure in an organization?
2. Receivables constitute an important line item on a
company’s balance sheet. In this thread, we will discuss the accounting for
receivables, the ways to estimate uncollectible accounts, and how companies
manage their receivables. How do companies account for the possibility that
some of their customers might not pay down the road?
Also following are the discussion by other student. Please provide your own reflection. Any thoughts or question relate to his/her post will be fine.
Student A: As referred to the book to prevent misappropriation of assets or any fraudulent financial reporting, internal control plays a major role which maintain a system of procedures that is implemented by company management and board of directors in order to achieve five objectives:
2)Encourage employee to follow company policy
3)Promote operational efficiency
4)Ensure accurate records
5)Comply with legal requirement
Student B : It is impossible for a business to collect all accounts receivable. The reason is because many different people are involved and some business owners might not be good business people therefor they are not able to repay their debts. Company’s are aware of that and because of that they have a section in their balance sheet dedicated to uncollectible account expense or bad debt expense.
A way to determine the measurement of bad debt is though the allowance method. It uses historical data on past collections to determine account expenses that are uncollectible.