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Chapter 7.docx

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MKT 2210
Subbu Sivaramakrishnan

Chapter 7:Improving control procedures The purpose of payroll system is to compute the gross wages and salaries of employees and produce payslips,cheques and/or listings sent to banks instructing them to make payments.Key controls over payroll system cover setting of wages and salaries(employees are only paid for work that they have done),recording of wages and salaries(wages and salaries are correctly calculated and recorded),payment of wages and salaries(the correct employees are paid) and deductions from pay(deductions have been calculated correctly and are authorised). Controls on purchases cycle will be based around buying(authorisation),goods inwards(checks) and accounting(recording). Controls on sales cycle will be based around selling(authorisation),goods outwards(checks) and accounting(recording). The control of cash is of prime importance in any business.Key objectives for the control of cash are to ensure that all sums are received and subsequently accounted for,no payments are made which should not be made,all receipts and payments are promptly and accurately recorded and as part of working capital management.Cash and petty cash must be regularly reconciled.Every payment must be approved by an authorised person.A bank reconciliation should be done at least once a month. Control is enhanced by an integrated accounting system.An integrated system automatically links together the different elements of an accounting package, such as sales, purchases and stock.There are a number of potential benefits to this: (i) One entry updates all of the others so there are fewer data inputs and fewer errors. (ii) Fewer people need to be involved in the input. This makes it possible to have more restricted access to the computer system, which enhances overall control. (iii) Errors in one module are unlikely to go unnoticed because they will impinge upon other areas. (iv) Frauds involving just one accounting area are difficult to maintain because queries will tend to arise in other areas. Chapter 8:Management information and reporting system Good management information is ACCURATE: Accurate Complete Cost-beneficial User-targeted Relevant Authoritative Timely Easy to use Three main functions of management where management information can be useful are as follows: (i) Planning: management needs to decide what the objectives of the company are and how they can be achieved.Management information is used to help management to plan the resources that a business will require and how they will be used. (ii) Control: once
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