Question 1

Internal control procedures for cash receipts do not require that:

Accepted Answer

A)  Cash sales should be recorded on a cash register at the time of each sale.
B)  Custody over cash is kept separate from its recordkeeping.
C)  An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.
D)  All collections for sales are received immediately upon making the sales.
E)  Clerks having access to cash in a cash register should not have access to the register tape or file.

Question 2

The following information is available for Birch Company at December 31:   Money market fund balance $2,790 Certificate of deposit maturing June 30 of next year $10,000 Postdated checks from customers $1,475 Cash in bark account $21,430 NSF checks from customers returned by bank $650 Cash in petty cash fund $200 Inventory of postage stamps $24 U.S. Treasury bill purchased on December 15 and maturing on February $5,00028 following year \begin{array} { | l | r | } \hline 	ext { Money market fund balance } & \$ 2,790 \\hline 	ext { Certificate of deposit maturing June } 30 	ext { of next year } & \$ 10,000 \\hline 	ext { Postdated checks from customers } & \$ 1,475 \\hline 	ext { Cash in bark account } & \$ 21,430 \\hline 	ext { NSF checks from customers returned by bank } & \$ 650 \\hline 	ext { Cash in petty cash fund } & \$ 200 \\hline 	ext { Inventory of postage stamps } & \$ 24 \\hline 	ext { U.S. Treasury bill purchased on December } 15 	ext { and maturing on February }&\$5,000 \28 	ext { following year }\\hline \end{array} Money market fund balance  Certificate of deposit maturing June 30 of next year  Postdated checks from customers  Cash in bark account  NSF checks from customers returned by bank  Cash in petty cash fund  Inventory of postage stamps  U.S. Treasury bill purchased on December 15 and maturing on February 28 following year ​$2,790$10,000$1,475$21,430$650$200$24$5,000​​  Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

Accepted Answer

A)  $38,770
B)  $29,420
C)  $41,345
D)  $31,345
E)  $39,420

Question 3

Describe a bank reconciliation and discuss its purpose.

Accepted Answer

A bank reconciliation is a report explaining any differences between the checking account balance according to a depositor's records and the balance reported on the bank statement. It can be used to prove the accuracy of a company's cash records. The balance of a checking account reported on the bank statement rarely equals the balance in the depositor's accounting records due to information that one part has that the other does not, or due to potential errors. The reconciliation procedure examines the differences based on the information available to the company and adjusts for the differences. It also serves as a format for the discovery and correction of errors.

Question 4

Describe the basic bank services that contribute to the control of cash and identify at least two internal control objectives served by the banking activities.

Accepted Answer

Basic bank services can be organized int...

Question 5

Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.

Accepted Answer

A) True 
 B)False

Question 6

Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

Accepted Answer

A) True 
 B)False

Question 7

In the process of reconciling its bank statement for January, Maxi's Clothing's accountant compiles the following information:
$\begin{array}{|l|l|r|}
\hline \text { December } 4 & \text { Freight charge for merchandise purchased } & \$ 62 \
\hline \text { December } 7 & \text { Delivery charge for shipping to customer } & \$ 46 \
\hline \text { December } 12 & \text { Purchase of office supplies } & \$ 30 \
\hline \text { December } 18 & \text { Donation to charitable oigganization } & \$ 51 \\hline \text { December 18 } & \text { Donation to charitable organization } & \$ 51 \
\hline
\end{array}$
The adjusted cash balance per the books on January 31 is:
A) $ \$ 4,055 $
B) $ \$ 4,585 $
C) $ \$ 5,335 $
D) $ \$ 4,815 $
E) $ \$ 5,855 $

Accepted Answer

The answer of In the process of reconciling its bank...

Question 8

Most large thefts occur from payment of fictitious invoices, which makes control of cash disbursements especially important for companies.

Accepted Answer

A) True 
 B)False

Question 9

Match between columns
                        Premises: A company manager keeps pre-signed checks in his desk drawer for employees to hand write when the accountant is out of the office.
A company fails to hire a CPA to perform an annual audit.
Only sales clerks use the cash registered, but they all share the same cash drawer.
The bookkeeper prepares and signs checks and completes the bank reconciliation.
A large company has no internal auditor on staff.
A company uses a voucher system, but the cash disbursement clerk pays directly from invoices received.
A restaurant allows servers to keep cash collected in their aprons and ring in all sales at the end of the night.
A company does not bond its key cash-handling employees.
A company has a single department that handles purchasing, receiving, and inventory management.
Cashiers have access to the cash register recorded tape or file.

Accepted Answer

The Answer of Establish responsibility and Apply technological controls and is...

Question 10

On a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made.

Accepted Answer

A) True 
 B)False

Question 11

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Accepted Answer

A) True 
 B)False

Question 12

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Accepted Answer

A)  Add the check amount to the bank balance.
B)  Deduct the check amount from the book balance of cash.
C)  Add the check amount to the book balance of cash.
D)  Make a journal entry in the company records for an error.
E)  Deduct the check amount from the bank balance.

Question 13

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

Accepted Answer

A) True 
 B)False

Question 14

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

Accepted Answer

A)  Add $45 to the bank's balance.
B)  Add $45 to the book balance.
C)  Subtract $45 from the bank's balance.
D)  Subtract $45 from the bank's balance and add $45 to the book's balance.
E)  Subtract $45 from the book balance.

Question 15

Internal controls are crucial to companies that convert from U.S. GAAP to IFRS because of all of the following risks except:

Accepted Answer

A)  Ineffective communication of the change to investors, creditors, and others.
B)  Possible misstatement of financial information.
C)  Management's inability to certify the effectiveness of the controls.
D)  Possible fraud.
E)  Controls are significantly different across the globe. E

Question 16

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Accepted Answer

A)  Debit Cash Over and Short for $43.
B)  Debit Petty Cash for $43.
C)  Credit Cash Over and Short for $43.
D)  Credit Petty Cash for $43.
E)  Credit Cash for $43.

Question 17

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control of cash.

Accepted Answer

A) True 
 B)False  True

Question 18

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling, general and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 19

Preparing a bank reconciliation on a monthly basis is an example of:

Accepted Answer

A)  A technological control.
B)  Poor internal control.
C)  Separation of duties.
D)  Protecting assets by proving the accuracy of cash records.
E)  Establishing responsibility.

Question 20

The principles of internal control include:

Accepted Answer

A)  Maintain minimal records.
B)  Bond all employees.
C)  Separate recordkeeping from custody of assets.
D)  Use only computerized systems.
E)  Require automated sales systems.

Exam 8: Cash and Internal Controls

Internal control procedures for cash receipts do not require that:

Correct Answer
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Correct Answer
verified

Describe a bank reconciliation and discuss its purpose.

Describe the basic bank services that contribute to the control of cash and identify at least two internal control objectives served by the banking activities.

Correct Answer
verified
Basic bank services can be organized int...
View Answer

Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.

Correct Answer
verified

Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

Correct Answer
verified

Correct Answer
verified

Most large thefts occur from payment of fictitious invoices, which makes control of cash disbursements especially important for companies.

Correct Answer
verified

Match each of the following transactions with the applicable internal control principle that is being violated listed.

On a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made.

Correct Answer
verified

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Correct Answer
verified

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Correct Answer
verified

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

Correct Answer
verified

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

Correct Answer
verified

Internal controls are crucial to companies that convert from U.S. GAAP to IFRS because of all of the following risks except:

Correct Answer
verified
E

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Correct Answer
verified

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control of cash.

Correct Answer
verified
True

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling, general and administrative expenses.

Correct Answer
verified

Preparing a bank reconciliation on a monthly basis is an example of:

Correct Answer
verified

The principles of internal control include:

Correct Answer
verified

Exam 8: Cash and Internal Controls

Internal control procedures for cash receipts do not require that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe a bank reconciliation and discuss its purpose.

Describe the basic bank services that contribute to the control of cash and identify at least two internal control objectives served by the banking activities.

Correct AnswerverifiedBasic bank services can be organized int...View AnswerShow Answer

Since petty cash is concerned with such small amounts of cash, it is not necessary to document all transactions with a petty cash receipt.

Correct AnswerverifiedShow Answer

Clearly establishing responsibilities and assigning all accounting activities to one person is an important principle of internal control.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most large thefts occur from payment of fictitious invoices, which makes control of cash disbursements especially important for companies.

Correct AnswerverifiedShow Answer

Match each of the following transactions with the applicable internal control principle that is being violated listed.

On a bank statement, deposits are listed as credits because the bank increases its liability to the depositor when the deposit is made.

Correct AnswerverifiedShow Answer

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Correct AnswerverifiedShow Answer

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Correct AnswerverifiedShow Answer

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

Correct AnswerverifiedShow Answer

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

Correct AnswerverifiedShow Answer

Internal controls are crucial to companies that convert from U.S. GAAP to IFRS because of all of the following risks except:

Correct AnswerverifiedE

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Correct AnswerverifiedShow Answer

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control of cash.

Correct AnswerverifiedTrue

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling, general and administrative expenses.

Correct AnswerverifiedShow Answer

Preparing a bank reconciliation on a monthly basis is an example of:

Correct AnswerverifiedShow Answer

The principles of internal control include:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Basic bank services can be organized int...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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E

Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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