mystery of disappearing oil

Topics: Gasoline, Filling station, Overdraft Pages: 5 (1297 words) Published: April 21, 2014
1. Assume the role of Fuad, the accountant. What changes, if any, would you recommend, in the management of the petrol station, to Mat Jon? Why? Be as explicit as possible.

The recommendation regarding to the management of the petrol station can divide into three major part, which is recording management, inventory management, and internal control. Because these problems can be directly or indirectly affect the performance of the business. In order to well managing a business, a skillful person with managerial aptitudes and ethical behavior are required. However, the person who carrying the day-to-day operation of the business, Jamel, does not possessed it.

RECORDING MANAGEMENT

Inaccurate amount in sales collection
Based on the cases, the Mat Jon found out that the sales collection was greatly different for the beginning of July and ending of the July. The sales figures for first two days were reasonable good, it was around RM32, 000,but it was dropped significantly in the end of the month, which is drop to RM14, 000 in 31st July. In 1st of July, the daily pump sales of unleaded petrol are RM34, 458.68, however, it already exceed the total sales of the day which amounting to RM 32, 220.40. Since the Mat Jon does not able to seek the explanation from his nephew, i suspect there is high possibility sales was take place, but may be intentionally or unintentionally omitted recording. Recommendation:

I would suggest Mat Jon make a proper reconciliation between the sales recorded, physical balance of unleaded petrol and bank statement in order to found out the missing amount.

Exceeding of the overdraft amount
The petrol station facing the shortage of cash and this is showed on the exceed limit of the bank overdraft. Compare the daily cash sales receive with the amount in the bank statement, it showed that the cash sales that deposit into the bank are lower than the actual sales. The overdraft limit is only RM20, 000, but they already overdraft for RM 21, 019.42. From the sales collection report, most of the sales is deemed from cash, so it is less likely the petrol station will facing the shortage of cash. It may be either have theft of cash or intentionally manipulation by Jamel since the Jamel was felt nervous when Mat Jon questioning him. Recommendation:

Mat Jon should reconcile all the cash received against the sales, and this could be done in daily. In addition, Mat Jon should consider installing a CCTV all around the petrol station in order to prevent theft of cash by unethical staff.

INVENTORY MANAGEMENT

Inaccurate amount in stock balance report
In addition, from the stock balance report, we found that the balance of the stock in the report is lower than the actual balance that the company should have. There are some shortfalls in the physical balance of the unleaded petrol. Jamel, who in charge in the petrol station,should have responsible on the stock balances, so I assume that Jamel might be manipulate the figure in the stock balance report in order to gain self-interest. For example, he was paying out the cheque without obtaining any stock. Recommendation:

Matching the purchase order (PO), delivery order (DO), and invoices when payment is made. Mat Jon should track back all the supporting documents in order to ensure the payment is made for the petrol purchased. In addition, this is related to the proper segregation of duties. Mat Jon should not give all the right and authority to Jamel.

Increased in cost of sales while the sales are dropping over years Based on the trend analysis report, the cost of sales was increasing over years but the sales were decline significantly. One of the possibilities is that the inflation causes the cost of petrol increase and so leads to the decreasing in profit. But this assumption is less possible in this case. This is because the performance of recent year could not reasonably explain the increased cost. This might due to Jamel reported the cost...
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