Question

In the performance of which transaction(s) does segregation of duties serve as an important internal control?

1 Cash receipts, not credit sales

2 Both cash receipts and credit sales

3 Credit sales, not cash receipts

4 None of these answer choices are correct.

Answer 1

Segregation of duty serve important internal control to avoid any misappropriation of asset for any financial statement.

Misappropriation of asset includes any loss of cash to theft when cash sales is done. Also it includes cash skimming where in the amount is written off from the account receivable amount and no sale is shown when credit sale is done.

So segregation of duty plays an important part both in cash receipts as well as credit sales. Hence the correct answer is 2.