Far Eastern University
Institute of Accounts, Business and Finance
Business Administration Department
THE INTERNAL ACCOUNTING CONTROL SYSTEM
OF THE GENERIC DRUGSTORE BUSINESS
As partial fulfillment for
Second Semester 2009-2010
Delector, Janice G.
Domiquel, April G.
Figuerrez, Leizel Anne F.
Nuguid, Abigail G.
Patawaran, Marmina F.
Internal Control is the process designed to ensure reliable financial reporting, effective and efficient operations and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal is also part of internal control. Effective Internal Control also reduces the possibility of significant errors and irregularities and assists in their timely detection when they do occur. This study shall focus only on the internal accounting control practices of the business.
As stated above, internal control can be viewed as a special system installed within a business entity. It is put there primarily on the basis of achieving management objectives related to the following:
• Safeguarding assets
• Assurance against the incurrence of improper liabilities
• Assurance of the accuracy and reliability of accounting data
• Minimizing the temptation of fraud
Ideally, internal accounting control system is established to discourage and prevent fraud. This comes from the popular saying that prevention is always better than cure. However, authors on the subject observe that no matter how competent a device may be, no matter how foolproof one thinks of the internal control system is, there will always be the persistence of criminal and malicious intents of other people whether on the side of the employees and/or on the side of the management.
In this study, only the internal accounting control system of the Generic Drugstore business in Sampaloc, Manila will be the main focus. The term internal control will be use interchangeably with internal accounting control, both terms shall mean one.
In the field of business, numerous problems come across, whether it’s big or not, be it accounting or administrative. The characteristics of the owner or the manager, the kind and size of the business and some other aspects, appear to affect the operations of the business.
A business should be organized and managed well in order to accomplish its goals and objectives this is according to de Castro1. One side that a business shall consider to achieve its goals is to set an internal control. Holmes declares that internal control is the most important foundation for a strong business.
Walter Meigs2 says that the long run trend for corporation to evolve into organizations of gigantic size and scope, including a large variety of specialized technical operations and employees has made it impossible for corporate executives to use personal first hand supervision of operations.
Just like small businesses organization that recognizes the need for systematic operations that will bring on smooth-running ways of business, big companies also need systematic operations and this need is emphasized here, where the principle of systematic management is very important. For gigantic organizations, there are huge number and interrelated activities that have to be efficiently supervised, so the necessity for efficient management. Under this, adequate implementation of the accounting control system helps to see that everything is being followed in accordance with the rules that have been implemented.
In the large concern, Meigs3 claims that great internal control maybe achieved by lengthily subdividing duties, so that no one person handles a transaction completely in the cycle of the business. However, with only one or...
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