Q5RQ - Horngren'S Financial And Managerial Accounting

Question

What is separation of duties?

Step-by-Step Solution

Answer

To divide duties according to the activities.

Step 1: Definition of duties

Duties mean assigning a job to a specified person. The person is only responsible for his duty.

Step 2: Separation of duties

Separation of duties means assigning different duties to different people. Different activities related to a job are assigned to different people based on their jobs.

Different types of separation are the basis of their functions:

• Separation of duties of cash:

In the separation of the duties of cash, all the duties related to cash payments and cash receipts are assigned to a person. This person has all the responsibilities related the cash transactions. If there is a mistake in the cash transactions, this person is responsible for the mistake.

 

• Separation of duties of inventory:

According to this separation, the duties related to inventory are assigned to a person. This person must manage and control the inventory. This person is responsible for inventory-related activities.

 

• Separation of duties of accounts receivables:

In this separation of duties, all the duties related to the accounts receivables are assigned to a person. This person manages all the accounts receivable records. He also collects all the accounts receivables.