Exam 7: Sarbanes-Oxley, Internal Control, and Cash

Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.

A check drawn by a company for $340 in payment of a liability was recorded in the journal as $430. What entry is required in the company's accounts?

Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash.

A customer's check received in settlement of an account receivable is considered cash.

Consider the following information taken from the cash account. Assume cash payments were 80% of collections. How much was the beginning balance of the cash account?

Expenditures from a petty cash fund are documented by a petty cash receipt.

In preparing a bank reconciliation, the amount indicated by a debit memo for bank service charges is added to the balance per company's records.

Why would a bank require a company to maintain a compensating balance?

A backlog in recording transactions is an example of a warning sign from the accounting system.

An element of internal control is

Assign the letter to indicate whether the following items would be added or subtracted from the company's books or the bank statement during the construction of a bank reconciliation. -outstanding checks

The amount of cash to be reported on the balance sheet at June 30 is the

Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records.

The bank statement for Farmer Co. indicates a balance of $7,735.00 on June 30. After the journals for June had been posted, the cash account had a balance of $4,098.00. Prepare a bank reconciliation on the basis of the following reconciling items: a) Cash sales of $742 had been erroneously recorded in the cash receipts journal as $724. b) Deposits in transit not recorded by bank, $425. c) Bank debit memo for service charges, $35. d) Bank credit memo for note collected by bank, $2,475 including $75 interest. e) Bank debit memo for $256 NSF not sufficient funds) check from Janice Smith, a customer. f) Checks outstanding, $1,860.

In preparing a bank reconciliation, the amount indicated by a credit memo for a note receivable collected by the bank is added to the balance per company's records.

Match each item to a bank statement adjustment, a company books adjustment, or either. -Note collected by the bank

Which of the following should not be considered cash by an accountant?

Assign the letter to indicate whether the following items would be added or subtracted from the company's books or the bank statement during the construction of a bank reconciliation. -interest revenue earned by the note above

Journalize the entries to record the following: March 1 Established a petty cash fund of $300. March 31 The amount of cash in the petty cash fund is now $64. The fund is replenished based on the following receipts: office supplies, $137; selling expenses, $112. Record any discrepancy in the cash short and over account. Journal

The Sarbanes-Oxley Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures.