Exam 5: Internal Control and Cash

Zorro Inc.has the following cash register data for December 31: Cash register total for cash sales $23,500 Cash receipts from cash sales $23,480 How should the difference be recorded?

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Question 1

Correct Answer:

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C

Using the following information, prepare a bank reconciliation for Murack Co.for May 31, 2016: (a)The bank statement balance is $4,063. (b)The cash account balance is $3,735. (c)Outstanding checks amounted to $640. (d)Deposits in transit are $245. (e)The bank service charge is $40. (f)A check for $74 for supplies was recorded on the depositor's books as $47.

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Question 2

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$\begin{array}{c}\text {Murack Co.}\\\text { Bank Reconciliation}\\\text { May 31.2016}\\\begin{array}{lr}\hline\text { Cash balance according to bank statement } & &\$ 4,063 \\\text { Add: Deposits in transit not recorded by bank }&&\underline{245}\\&&\$4,308\\\text { Deduct: Outstanding checks } & \underline{\$ 640}& \underline{640} \\\text { Adjusted balance } && \underline{\$ 3,668}\\\\\text { Cash balance according to Murack Co. } && \$ 3,735 \\\text { Deduct: Bank service charge } & \$ 40 & \\\quad \text { Error in recording } & \underline{27} & \underline{67} \\\text { Adjusted balance } & & \underline{\$ 3,668}\end{array}\end{array}$

List the objectives of internal control and give an example of how each is implemented.

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Question 3

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The objectives of internal control are to provide reasonable assurance that:
(1)Assets are safeguarded and used for business purposes.
(2)Business information is accurate.
(3)Employees comply with laws and regulations.
Examples are:
(1)Duties are separated.
(2)Duties are rotated.
(3)Reports are submitted to management.
There are many other examples that would be correct.

When a company reports negative net cash flows from operations _____.

(Multiple Choice)

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Question 4

The bank reconciles its statement to the depositor's records.

(True/False)

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Question 5

For efficiency of operations and better control over cash, a company should maintain only one bank account.

(True/False)

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Question 6

A bank issues credit memos for:

(Multiple Choice)

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Question 7

A debit memorandum from the bank indicates that the bank has deducted an amount from the depositor's account.

(True/False)

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Question 8

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would require an adjusting entry including a:

(Multiple Choice)

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Question 9

The bank informs the depositor of bank service charges by including a credit memorandum with a monthly bank statement.

(True/False)

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Question 10

In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor's records is deducted from the cash balance per books.

(True/False)

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Question 11

Which element of internal control observes employees' behavior and the accounting system for indicators of control problems?

(Multiple Choice)

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Question 12

List and define each of the five elements of internal control set forth by the Integrated Framework.

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Question 13

Which of the following would be deducted from the cash balance per books on a bank reconciliation?

(Multiple Choice)

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Question 14

The depositor reconciles the bank's statement to the depositor's records.

(True/False)

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Question 15

In preparing a bank reconciliation, the amount of outstanding checks is deducted from the cash balance per books.

(True/False)

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Question 16

Internal controls are important because they:

(Multiple Choice)

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Question 17

A business that requires all cash payments be made by check cannot use a petty cash system.

(True/False)

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Question 18

Denominator in the ratio of cash to monthly cash expense is calculated as _____.

(Multiple Choice)

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Question 19

Employee fraud is the intentional act of deceiving an employer for personal gain.

(True/False)

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Question 20

Zorro Inc.has the following cash register data for December 31: Cash register total for cash sales $23,500 Cash receipts from cash sales $23,480 How should the difference be recorded?

List the objectives of internal control and give an example of how each is implemented.

When a company reports negative net cash flows from operations _____.

The bank reconciles its statement to the depositor's records.

For efficiency of operations and better control over cash, a company should maintain only one bank account.

A bank issues credit memos for:

A debit memorandum from the bank indicates that the bank has deducted an amount from the depositor's account.

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer.This item would require an adjusting entry including a:

The bank informs the depositor of bank service charges by including a credit memorandum with a monthly bank statement.

In preparing a bank reconciliation, the amount of a canceled check omitted from the depositor's records is deducted from the cash balance per books.

Which element of internal control observes employees' behavior and the accounting system for indicators of control problems?

List and define each of the five elements of internal control set forth by the Integrated Framework.

Which of the following would be deducted from the cash balance per books on a bank reconciliation?

The depositor reconciles the bank's statement to the depositor's records.

In preparing a bank reconciliation, the amount of outstanding checks is deducted from the cash balance per books.

Internal controls are important because they:

A business that requires all cash payments be made by check cannot use a petty cash system.

Denominator in the ratio of cash to monthly cash expense is calculated as _____.

Employee fraud is the intentional act of deceiving an employer for personal gain.

The Role of Accounting in Business

Basic Accounting Systems: Cash Basis

Basic Accounting Systems: Accrual Basis

Accounting for Merchandising Businesses

Receivables and Inventories

Fixed Assets, Natural Resources, and Intangible Assets

Liabilities and Stockholders Equity

Metric Analysis of Financial Statements

Accounting for Manufacturing Operations

Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Costs

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

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