The risk of not implementing internal control is that it can lead to unethical practices in the workplace.
Internal control refers to the process for assuring the objectives of an organization in operational efficiency and effectiveness. Reliable financial reporting and compliance with laws are vital in internal control.
The risk of not implementing internal control is that it can lead to unethical practices. Also, since there isn't any review of the work done by the financial manager, and this can be risky for the company. This can lead to fraudulent activities.
Since the bank statement is different from the cash book balance, the bank can reconcile this by getting the bank records. This can be done through the checking of appropriate debit and credit transactions in the bank records.
a. Date Account Title and Explanation Debit Credit
1 - Jul Cash ($440,000-$22,000-$7,920) $410,080
Due from Factor ($440,000*5%) $22,000
Loss on sale of receivables ($440,000*1.8%) $7,920
Accounts receivable $440,000
(To record sale of accounts receivable to Factor)
b. Date Account Title and Explanation Debit Credit
1 - Jul Accounts receivable $440,000
Due to customer $22,000
Interest revenue $7,920
(To record purchase of accounts receivable)
c. Sale or financing of accounts receivables with recourse is a transaction in which a company sells its accounts receivable to a factoring company with an assurance to cover the risk of uncollectible.
Sale or financing of accounts receivables without recourse is a transaction in which the company selling its accounts receivables to a factoring company, in which the factoring company bears the risk of uncollectible.