DUE DATE: December 1, 2020 (Tuesday)

Question 1

The Art Appreciation Society operates a museum for the benefit of charitable organizations
within Batangas City area.

When the museum is open to the public, two clerks who are positioned at the entrance collect a
Php50 admission fee from each nonmember patron. Members of the Art Appreciation Society
are permitted to enter free of charge upon presentation of their membership cards.

At the end of each day, one of the clerks delivers the proceeds to the treasurer. The treasurer
counts the cash in the presence of the clerk, and places it in a safe. Each Friday afternoon, the
treasurer and one of the clerks deliver all cash held in the safe to the bank and receive an
authenticated deposit slip that provides the basis for the weekly entry in the accounting records.

The Art Appreciation Society’s board of directors has identified a need to improve its internal
controls over cash admission fees. The board has determined that the cost of installing turnstiles,
sales booths, or otherwise altering the physical layout of the museum will greatly exceed any
benefits.

However, the board has agreed that the sale of admission tickets must be an integral part of its
improvement efforts.

Mr. Barney Stinson has been asked by the board of directors of the Art Appreciation Society to
review the internal control over cash admission fees and to provide suggestions for
improvements.

REQUIRED:

Indicate the weaknesses in the existing internal controls over cash admission fees that Mr.
Barney Stinson should identify. Recommend one improvement for each of the weakness
identified. Use the following illustrative example:

WEAKNESS
1. There is no basis for establishing the
documentation of the number of paying
patrons.
2. There are no forecasts, budget or standards
set to compare with the actual performances
and be the basis for monitoring and adaptation
of necessary remedial measures in case of
differences.
3. There are no complete records of cash
being received each day by the clerks.
RECOMMENDATION
Pre-numbered admission tickets should be
issued upon payment of the admission fee.
Budgets or forecasts must be set and compare
with the actual performance to specifically
determine which parts of operations need
improvements.
They could use cash register to have a record
of all cash being received by the clerks and
ensure accuracy, and then present the

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 proceeds with the records.

Question 2

Recently, while eating lunch with your family at a local cafeteria, you observed a practice that is
somewhat unusual. As you reached the end of the cafeteria line, an adding machine operator
asked the number of persons in your group. He then totaled the food purchase on the trays for all
of your family members and wrote the number of persons included in the group on the adding
machine tape. He handed you the tape and asked you to pay after eating. Near the end of the
meal, you decided to order a piece of pie and a cup of coffee so you returned to the line, selected
your food, and again went through the same procedures. This time, the adding machine operator
stapled the second tape to the original and returned it to you.

When you left the cafeteria, you handed the stapled adding machine tapes to the cash register
operator who totaled the two tapes, took your money, and put the tapes on a spindle.

REQUIRED:

a. What internal controls has the cafeteria instituted for its operations?
b. How can the manager of the cafeteria evaluate the effectiveness of the controls?
c. How do these controls differ from those used by most cafeterias?
d. What are the costs and benefits of the cafeteria’s system?

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