College of Administration and Finance Sciences
Assignment (2)
Deadline: Saturday 6/11/2021 @ 23:59
Course Name: Principles of
Accounting
Student’s Name:
Course Code: ACCT101
Student’s ID Number:
Semester: 1st
CRN:
Academic Year: 1443 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/5
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
 The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
 Students must mention question number clearly in their answer.
 Late submission will NOT be accepted.
 Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No
exceptions.
 All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
 Submissions without this cover page will NOT be accepted.
College of Administration and Finance Sciences
Assignment Question(s):
(Marks 5)
Q1. A company that uses a perpetual inventory system made the following cash purchases and sales.
There was no beginning inventory.(2 marks)
January 1:
Purchased 100 units at SAR10 per unit
February 5:
Purchased 60 units at SAR 12 per unit
March 16:
Sold 40 Units for SAR 16 per unit
1. Explain the four inventory valuation methods.
2. Prepare general journal entries to record the March 16 sale using the
I.
FIFO inventory valuation method.
II.
LIFO inventory valuation method.
Q2. The office manager of ABC company has the authority to the whole financial operations. He
authorizes activities, controls the company’s expenses, records the company’s transactions, and
rarely takes vacation.
The owners of the company are happy with his work since the company is making a profit. You are
giving the opportunity to educate the owners about the risk of not implementing internal control.
What would be your advice? (2 marks)
Q3. At the end of the month, XYZ company’s bank statement is different from the cash book
balance. How would the company do the bank reconciliation? (1mark)
College of Administration and Finance Sciences
Q.1
1)The four invetory valuation methods are as follows:
a) Specific Identification Method: The specific identification method of inventory costing attaches
the actual cost to an identifiable unit of product
b) FIFO Method: The FIFO (first-in, first-out) method of inventory costing assumes that the costs
of the first goods purchased are those charged to cost of goods sold when the company actually sells
goods.
c) LIFO Method: The LIFO (last-in, first-out) method of inventory costing assumes that the costs of
the most recent purchases are the first costs charged to cost of goods sold when the company actually
sells the goods.
d) Weighted Average Method: The weighted-average method of inventory costing is a means of
costing ending inventory using a weighted-average unit cost.
I) FIFO
Date
Mar 16
General Journal
Cash (40*16)
Sales revenue
Debit
640
Cost of goods sold (40*10)
Merchandise inventory
400
General Journal
Cash (40*16)
Sales revenue
Debit
640
Cost of goods sold (40*12)
Merchandise inventory
480
Credit
640
400
II) LIFO
Date
Mar 16
Credit
640
480
College of Administration and Finance Sciences
Q.2
The absence of internal control would create the following risks for the owners and the companyHigher risk of fraud and errors- Not having internal control can allow one employee or more to
exploit the company's resources and assets for personal use. They can use the company's funds for
personal pleasures such as vacation, purchasing items, etc. Activities such as embezzlement,
accounting fraud can be eliminated if the work of employees is internally monitored and controlled
by one another.
Discrepancies in accounting and financial information- One person managing the whole financial
and accounting information can have discrepancies that may lead to errors and disadvantages to the
company. Internal controls such as auditing can make sure information is reliable and accurate in the
books. Hence, errors can be found and eliminated via internal control.
Legal risksIn absence of internal control, The company is vulnerable to the violation of laws such as the
Sarbanes-Oxley Act of 2002 and attracts lawsuits related to accounting frauds and scandals. This
affects the reputation of the company in the eyes of its stakeholders and the public. By having
internal control, financial reporting can be done in a legal manner. Hence reducing the chances of
violation of laws and avoid lawsuits.
Risk of Reducing operational efficiency- In absence of internal control, The company will suffer
higher costs, the poor performance of employees, and errors that affect the company's assets. By
having reliable and authentic information by internal control, It can be used to manage and assess the
performance of employees promoting operational efficiency of the company.
So, yes, The advice would be to implement internal control in the ABC company in order to mitigate
or avoid the above risks.
College of Administration and Finance Sciences
Q.3