Posted: May 2nd, 2016

What internal controls prevent an individual from adding fictitious employees to payroll records?

d. Elizabeth Enterprises expects to begin 2011 with a cash balance of $15,000. Cash collections from sales and on account during the year are expected to be $470,500. The firm wants to maintain a minimum cash balance of $5,000. Budgeted cash disbursements for the year are as follows:
Payoff of note payable ………………………………………………………….. $52,500
Interest on note payable ……………………………………………………….. 4,700
Purchase of computer system ………………………………………………… 17,900
Payments for operating costs and inventory purchases ……………… 193,500
Direct labor payments …………………………………………………………… 110,000
Cash overhead payments ……………………………………………………… 106,400
Cash selling and administrative payments ……………………………….. 94,800
The company can, if necessary, borrow in $1,000 amounts. Prepare a cash budget for 2011.The ability to add ghost employees to a company’s payroll system is often the result of a breakdown in internal controls. What internal controls prevent an individual from adding fictitious employees to payroll records?