BUS-FPX4060 Assessment 3: Internal Control and Accounting for Assets

Complete three accounting exercises in which you prepare a bank reconciliation and journal entries and compute asset depreciation using a provided worksheet.

Introduction

All business organizations, whether a large corporation or sole proprietorship, need to maintain internal control over the assets belonging to the business. Managers and owners place a high priority on internal control systems because they can prevent avoidable losses, help managers plan operations, and monitor organization performance

Overview

This assessment consists of three accounting exercises. The exercises are provided in the Internal Control and Accounting for Assets Worksheet. Use this worksheet to record and submit your solutions for Exercises 3-1, 3-2, and 3-3.

Preparation

In addition, practice problems for each exercise are provided in the Assessment 3 Practice Problems Worksheet.The worksheet and answer key can be found in the Capella Resources activity of this assessment and are optional.

The Assessment 3 Context document contains important information related to internal controls and accounting for assets addressing the following topics:

• Cash and Cash Equivalents.
• Receivables.
• Long-Term Assets.

The following resource is required to complete the assessment.

CAPELLA RESOURCES

Click the link provided to complete the assignment worksheet:

• Internal Control and Accounting for Assets Worksheet [DOCX].

Submission Guidelines

Submit your Internal Control and Accounting for Assets Worksheet for faculty evaluation. Please do not submit completed practice problems with your assessment.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

• Competency 2: Apply accounting principles as the language of business.
  • Prepare a bank reconciliation.
  • Prepare bank reconciliation journal entries.
  • Prepare accounts receivable journal entries.
• Competency 3: Communicate the effects of business events on an organization’s financial structure.
  • Compute plant asset depreciation using two different methods.

Assessment 3 Context

Internal Control and Accounting for Assets

Cash and Cash Equivalents

All business organizations, whether a large corporation or sole proprietorship, need to maintain internal control over the assets belonging to the business. This is especially important when it comes to the lifeblood of the organization: its cash and cash equivalents. A properly designed internal control system is a key part of systems design, analysis, and performance. Managers and owners place a high priority on internal control systems because they can prevent avoidable losses, help managers plan operations, and monitor organization performance. Internal controls do not provide guarantees; however, they do lower the organization’s risk of loss.

Receivables

Receivables represent amounts of money due from another party. Less common examples of this type of asset account include interest receivable, rent receivable, tax refund receivable, and receivables from employees. The two most common receivable types are accounts receivable and notes receivable. Accounts receivable are monies owed to a business from customers for sales of merchandise on credit.

This type of receivable comes about when customers use credit cards issued by third parties and when a business gives credit directly to its customers. When a business does extend credit directly to customers, it will most likely maintain a separate account receivable for each customer, most likely in a subsidiary journal to the main accounts receivable account. The business will also account for bad debts from credit sales.

A note receivable is a short-term promise to pay a specific amount of money, with interest, on demand or at a specified future date. These notes are used in transactions such as paying for large amounts of goods or services and lending and borrowing money. A business may sometimes grant customers an overdue account receivable with additional time to pay their account by making them sign such a note receivable.

Long-Term Assets

When scanning the financial statements of an organization, one cannot help but notice which category of assets on the balance sheet has the largest dollar percentage of the total assets. That distinction would almost always go to long-term assets. For most organizations, these assets are the most productive and are responsible for generating much of the organization’s revenues without incurring a substantial portion of its ongoing expenses.

Long-term assets can be grouped into plant assets, natural resource assets, and intangible assets. Plant assets, consisting of buildings, land, and equipment, yield depreciation (except for land) that is a large non-cash expense on an organization’s income statement. The acquisition or building of a plant asset is often referred to as a capital expenditure. These expenditures are vital to the success of an organization’s goals. Natural resource and intangible assets can have a similar impact depending on the type of business the organization generates.

The following e-books or articles from the Capella University Library are linked directly in this course:

• Haber, J. R. (2003). Accounting demystified. AMACOM Books.
• Berry, L. E. (2010). Financial accounting demystified. McGraw-Hill Professional Publishing

A Capella University library guide has been created specifically for your course business research. You are encouraged to refer to the resources in the Business Research Library Guide to help direct your research. See the Accounting tab for specialized resources.

The resource listed below is relevant to the topics and assessments in this course and is not required. 

• Wild, J. J., & Shaw, K. W. (2022). Financial and managerial accounting: Information for decisions (9th ed.). McGraw-Hill. Available in the courseroom via the VitalSource Bookshelf link. 
  • Chapter 6, “Cash, Fraud, and Internal Control.”
    • This chapter covers the bank reconciliation form and completing adjusting entries from a bank reconciliation.
  • Chapter 7, “Accounting for Receivables.”
    • This chapter covers the allowance method for bad debts and the adjusting entries for receivables.
  • Chapter 8, “Accounting for Long Term Assets.”
    • This chapter covers the three methods of depreciation: straight-line, units-of-production, and double-declining-balance.