Question 1

Separating the custody of assets from accounting for assets is a part of which element of internal control?

Accepted Answer

A)  Information and communication 
B)  Monitoring 
C)  Control environment 
D)  Control procedures 
A)  Information and communication 
B)  Monitoring 
C)  Control environment 
D)  Control procedures

Question 2

All organizations face risks, and the assessment of these risks is necessary so that the objectives of internal control can be achieved.

Accepted Answer

A) True 
 B)False

Question 3

_____, which constitute one of the most important elements of internal control, include separating responsibilities for related operations.

Accepted Answer

A)  Control procedures 
B)  Risk assessment activities 
C)  Risk monitoring procedures 
D)  Information and communication activities 
A)  Control procedures 
B)  Risk assessment activities 
C)  Risk monitoring procedures 
D)  Information and communication activities

Question 4

A voucher system is an example of an internal control procedure over cash receipts.

Accepted Answer

A) True 
 B)False

Question 5

What adjustment is required in the depositor's accounts to record outstanding checks?

Accepted Answer

A)  None 
B)  Increase Cash; decrease Accounts Receivable 
C)  Increase Cash; increase Accounts Payable 
D)  Increase Accounts Receivable; decrease Cash 
A)  None 
B)  Increase Cash; decrease Accounts Receivable 
C)  Increase Cash; increase Accounts Payable 
D)  Increase Accounts Receivable; decrease Cash

Question 6

All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.

Accepted Answer

A) True 
 B)False

Question 7

Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.

Accepted Answer

A) True 
 B)False

Question 8

The bank statement for Marley Co.indicates a cash balance of $10,000.50 on June 30, 2016.The cash account in Marley's records had a balance of $4,677.10.Illustrate the adjustments to the accounts and their effect on Marley's financial statements, based on the following reconciling items:
(a)Cash sales of $342 had been erroneously recorded in the cash receipts journal as $324.
(b)Deposits in transit not recorded by bank, $700.
(c)Bank debit memorandum for service charges, $30.
(d)Bank credit memorandum for note collected by bank, $2,050, including $50 interest.
(e)Bank debit memorandum for $207.40 NSF (not sufficient funds) check from Alice Martin, a customer.
(f)Checks outstanding, $4,192.80.
?
? $\text { Assets = }  \quad \text { Liabilities + Stockholders' Equity } $
$$\begin{array} { | l | l | l | l | l | l | l | } 
\hline & \text { Cash } & \begin{array} { c } 
\text { Accounts } \
\text { Receivable }
\end{array} & \begin{array} { c } 
\text { Notes } \
\text { Receivable }
\end{array} & \begin{array} { c } 
\text { Accounts } \
\text { Payable }
\end{array} & \begin{array} { c } 
\text { Capital } \
\text { Stock }
\end{array} & \begin{array} { c } 
\text { Retained } \
\text { Earnings }
\end{array} \
\hline & & & & & & \
\hline & & & & & & \
\hline & & & & & & \
\hline & & & & & & \
\hline & & & & & & \
\hline
\end{array}$$

Accepted Answer

@#LAT-DLM&
\[\begin{array} { | l | l| l| l | l | l

Question 9

There are only two internal control objectives: to ensure accurate financial reports, and to ensure compliance with applicable laws.

Accepted Answer

A) True 
 B)False

Question 10

A bank reconciliation should be prepared periodically because:

Accepted Answer

A)  the depositor's records and the bank's records are in agreement. 
B)  the bank has not recorded all of its transactions. 
C)  any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected. 
D)  the bank must make sure that its records are correct. 
A)  the depositor's records and the bank's records are in agreement. 
B)  the bank has not recorded all of its transactions. 
C)  any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected. 
D)  the bank must make sure that its records are correct.

Question 11

Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

Accepted Answer

A)  Control environment 
B)  Risk assessment 
C)  Control procedures 
D)  Monitoring 
A)  Control environment 
B)  Risk assessment 
C)  Control procedures 
D)  Monitoring

Question 12

A check for $456 was erroneously charged by the bank as $654.In order for the bank reconciliation to balance, you must subtract $198 from the bank statement balance.

Accepted Answer

A) True 
 B)False

Question 13

A check drawn by a depositor for $810 in payment of a liability was recorded by the depositor as $180.The $630 difference would be included on the bank reconciliation as a(n):

Accepted Answer

A)  addition to the cash balance per books. 
B)  addition to the cash balance per bank. 
C)  deduction from the cash balance per bank. 
D)  deduction from the cash balance per books. 
A)  addition to the cash balance per books. 
B)  addition to the cash balance per bank. 
C)  deduction from the cash balance per bank. 
D)  deduction from the cash balance per books.

Question 14

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item would be included on the bank reconciliation as a(n):

Accepted Answer

A)  deduction from the cash balance per books. 
B)  addition to the cash balance per bank. 
C)  deduction from the cash balance per bank. 
D)  addition to the cash balance per books. 
A)  deduction from the cash balance per books. 
B)  addition to the cash balance per bank. 
C)  deduction from the cash balance per bank. 
D)  addition to the cash balance per books.

Question 15

The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording transactions and preparing financial statements.

Accepted Answer

A) True 
 B)False

Question 16

Minimum cash balance maintained in the bank account is called line of credit.

Accepted Answer

A) True 
 B)False

Question 17

When a firm uses internal auditors, it is adhering to which of the following internal control elements?

Accepted Answer

A)  Risk assessment 
B)  Control procedures 
C)  Monitoring 
D)  Information and communication 
A)  Risk assessment 
B)  Control procedures 
C)  Monitoring 
D)  Information and communication

Question 18

The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 19

From the following particulars of Purple New Co., prepare the bank reconciliation statement as on May 31, 2016.
(a)The bank statement balance is $4,000.
(b)The cash account balance is $3,950.
(c)Outstanding checks amounted to $960.
(d)Deposits in transit are $900.
(e)The bank service charge is $75.
(f)Interest added to the checking account by the bank is $150.
(g)A check drawn for $65 was incorrectly charged by the bank as $150.

Accepted Answer

None

Question 20

The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.

Accepted Answer

A) True 
 B)False

Separating the custody of assets from accounting for assets is a part of which element of internal control?

All organizations face risks, and the assessment of these risks is necessary so that the objectives of internal control can be achieved.

_____, which constitute one of the most important elements of internal control, include separating responsibilities for related operations.

A voucher system is an example of an internal control procedure over cash receipts.

What adjustment is required in the depositor's accounts to record outstanding checks?

All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.

Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.

There are only two internal control objectives: to ensure accurate financial reports, and to ensure compliance with applicable laws.

A bank reconciliation should be prepared periodically because:

Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

A check for $456 was erroneously charged by the bank as $654.In order for the bank reconciliation to balance, you must subtract $198 from the bank statement balance.

A check drawn by a depositor for $810 in payment of a liability was recorded by the depositor as $180.The $630 difference would be included on the bank reconciliation as a(n):

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item would be included on the bank reconciliation as a(n):

The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording transactions and preparing financial statements.

Minimum cash balance maintained in the bank account is called line of credit.

When a firm uses internal auditors, it is adhering to which of the following internal control elements?

The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a bank reconciliation.

The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.

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

Filters

Exam 5: Internal Control and Cash

Separating the custody of assets from accounting for assets is a part of which element of internal control?

All organizations face risks, and the assessment of these risks is necessary so that the objectives of internal control can be achieved.

_____, which constitute one of the most important elements of internal control, include separating responsibilities for related operations.

A voucher system is an example of an internal control procedure over cash receipts.

What adjustment is required in the depositor's accounts to record outstanding checks?

All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts.

Bank customers are considered owners of the bank, so the bank shows their accounts as an asset on the bank's records.

There are only two internal control objectives: to ensure accurate financial reports, and to ensure compliance with applicable laws.

A bank reconciliation should be prepared periodically because:

Which of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?

A check for $456 was erroneously charged by the bank as $654.In order for the bank reconciliation to balance, you must subtract $198 from the bank statement balance.

A check drawn by a depositor for $810 in payment of a liability was recorded by the depositor as $180.The $630 difference would be included on the bank reconciliation as a(n):

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the depositor.This item would be included on the bank reconciliation as a(n):

The Sarbanes-Oxley Act of 2002 requires companies to maintain strong and effective internal controls over recording transactions and preparing financial statements.

Minimum cash balance maintained in the bank account is called line of credit.

When a firm uses internal auditors, it is adhering to which of the following internal control elements?

The data needed to adjust a depositor's books are shown in the "adjustments to the depositor's records" section of a bank reconciliation.

The Sarbanes-Oxley Act of 2002 applies to all publicly held companies.

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

Filters