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Exam 6: Cash and Internal Control

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Question 51

Multiple Choice

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Which internal control procedure is followed when a physical count of inventory is performed in a perpetual inventory system?

A) Segregation of duties
B) Safeguarding assets and records
C) Independent verifications
D) Proper authorizations

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Question 52

Multiple Choice

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A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. Identify the effects of the transaction in the company's accounts.

A) Decrease Accounts Payable; Decrease Cash
B) Increase Cash; decrease Accounts Receivable
C) Increase Cash; increase Accounts Payable
D) Increase Accounts Receivable; Decrease Cash

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Question 53

Multiple Choice

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Sarbanes-Oxley requires that the audit committee be composed of

Match the following terms with the best definitions for questions 212 through 219. -The practice of not combining physical custody of assets with the function of accounting for those assets.

Which one of the following items would be subtracted from the balance per books in a bank reconciliation

The key to the classification of an amount as cash is that it be readily available to pay debts.

Herbert and Evita are planning to open a quick copy center near the local college. They will make both cash and credit sales. They will hire college students to make copies and to operate the cash register. Either Herbert or Evita will act as manager during most hours that the business will be open. One student will be designated as assistant manager when they cannot be present. Describe procedures that Herbert and Evita might use to provide adequate internal control over cash and credit sales and bank deposits.

Which one of the following is not considered to be a cash equivalent?

A check written by a company but not yet presented to the bank for payment is called a check in transit.

Why is cash management necessary?

The department in an organization that is responsible for preparing the invoice approval form to document all of the information about a particular purchase is:

Accounting controls primarily concern safeguarding of assets and ensuring the reliability of the financial statements.

Which of the following items would not be a reconciling item?

A credit memorandum appeared on Central Company's bank statement. How will Central treat this amount on its bank reconciliation?

Which one of the following documents is used in the control of cash receipts?

For the following items Questions 220-227, indicate whether each should be a included or b excluded from the line item titled Cash and cash equivalents on the balance sheet. -Shares of GM stock

In a sound internal control system, all cash receipts should be deposited daily intact.

Which one of the following situations reflects a weak internal control system?

Realistic Sound's unadjusted bank balance amounted to $3,000. Outstanding checks amounted to $500 and deposits in transit totaled $300. Based on this information alone, Realistic's adjusted cash balance is:

An effective system of internal control is critical to protecting a company's investment in three of its major assets: cash, accounts receivable, and inventory. For each asset, describe how a company might protect that asset.