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Exam 8: Cash and Internal Controls

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Question 41

Multiple Choice

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The internal document that is prepared to notify the appropriate persons that ordered goods have been received and describes the quantities and condition of the goods is the

A) Purchase requisition.
B) Purchase order.
C) Invoice.
D) Receiving report.
E) Invoice approval.

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Question 42

Multiple Choice

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At the end of the day, the cash register's record shows $1,250, but the count of cash in the cash register is $1,245. The correct entry to record the cash sales is

A) Debit Cash $1,245; Credit Sales $1,245.
B) Debit Cash $1,245; debit Cash Over and Short $5; credit Sales $1,250.
C) Debit Cash $1,250; credit Sales $1,250.
D) Debit Cash $1,250; credit Sales $1,245, credit Cash Over and Short $5.
E) Debit Cash Over and Short $5, credit Sales $5.

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Question 43

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A voucher is an internal document or file used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded.

Electronic funds transfer (EFT) is the electronic transfer of cash from one party to another.

The use of internal controls provides guaranteed protection against losses due to operating activities.

The impact of technology on internal controls includes:

On August 25, a company purchased $5,000 worth of merchandise on terms 2/10, n/30; on September 4, the amount due was paid. Using the net method of recording purchases, prepare general journal entries to record (a) the purchase on August 25, and (b) the cash payment on September 4.

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

A petty cash fund was originally established with a check for $150. In the petty cash fund on December 31 (the period-end), you find the following: Prepare the general journal entry to record the replenishment of the petty cash fund on December 31.

Liquidity refers to a company's ability to pay its near-term obligations.

On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

A check involves three parties:

The number of days' sales uncollected:

A company established a petty cash fund in February of the current year and experienced the following transactions affecting the fund during February: Prepare the journal entries to establish the find, reimburse the fund and to reduce its amount on February 28.

A company plans to decrease a $200 petty cash fund to $75. The current balance in the account includes $45 petty cash payment in receipts and $165 in currency. The entry to reduce the fund will include a:

A __________________________ is a document explaining the payment of a check.

The document that is an itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales prices, and terms of the sale is the _________________________.

Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

Discuss how the principles of internal control apply to cash receipts.

________________ reflects the liquidity of a company's accounts receivable.