8. A recent hospitality major was hired by a small casino. The graduate quickly moved between positions and was highly regarded by the owners. Anxious to make a lasting impression, the graduate developed an internal control procedure that assured recapture of beer barrel deposits. The refund for returned beer barrels was $25 per barrel. During the key season over 100 barrels were often purchased. The graduate devised an inventory system to account for the purchase, receipt, issue and return of the barrels by the casino’s main beer stand counter employee. As the owner; think about reasons why this control should be adopted or abandoned. Write a short paragraph listing reasons pros and cons. Pros Cons
Internal control is necessary to maintain proper accounting of the inventory.In the inventory system, inventory flow ,i,e inflow , outflow and cost of goods sold are updated for each sale/purchase and return transaction. Inventory control should be designed in such a way that processing, inventory flows, purchasing, and physical inventory reconciliation functions of inventory management are fulfilled
pros and cons of inventory system to account for the purchase, receipt, issue and return of the barrels by the casino’s main beer stand counter employee are as follow
· this system facilitate timely requisition processing
· This system will improve financial control of the inventory by periodic reconciliation of the inventory balances with the physical counts
· It provide information on the availability of stocked items and the status of stocked requisitions
· It automatically record and service backorders
· This will help in minimize inventory investments consistent with service objectives by basing purchasing decisions on usage history
· To improve financial control of the inventory by chargebacks to the user organizations
Disadvantage of this system
· This is quite lengthy process
· It is time-consuming process for small business unit
