Exam 6: Cash and Internal Control

Latahmer Corporation is reconciling its May bank account. For each item listed, state how it would be handled on the bank reconciliation. -Service charge on the May bank statement for new checks

Segregation and rotation of duties is most effective in

The following accounts are listed in a company's general ledger: REQUIRED: 1. Which items are cash equivalents? 2. Explain where items that are not cash equivalents should be classified on the balance sheet. 3. What are the amount and the direction of change in cash and cash equivalents for 2015? Is the company as liquid at the end of 2015 as it was at the end of 2014? Explain your answer.

If collection of accounts receivable is assured, then accounts receivable are considered to be cash equivalents.

Which one of the following items would be added to the balance per books in a bank reconciliation?

A good system of internal controls requires that the physical custody of assets be separated from the accounting for those assets. This concept is known as safeguarding assets and records.

For the following items Questions 220-227, indicate whether each should be a included or b excluded from the line item titled Cash and cash equivalents on the balance sheet. -Petty cash

Petty cash typically is composed of coins and currency kept on hand in a business to make minor disbursements.

A purchase order is not the basis for recording a purchase and a liability.

At Forrest Industries, all sales are on account. Sienna Marcos is responsible for mailing invoices to customers, recording the amount billed, opening mail, recording the payment, and making deposits to the bank. Sienna is very devoted to the family business and never takes off more than one or two days for a long weekend. The customers know Sienna and sometimes send personal notes with their payments. Another clerk handles all aspects of accounts payable. Sienna's brother, who is president of Forrest Industries, has hired an accountant to help with expansion. REQUIRED: 1. List some problems with the current accounts receivable system. 2. What suggestions would you make to improve internal control? 3. How would you explain to Sienna that she personally is not the problem?

Checks returned by a bank because customers did not have sufficient funds in their account are called

When reconciling a bank account, the company does not have to prepare an adjusting entry for outstanding checks.

Which one of the following is a sound internal control procedure for cash disbursements?

What are at least four important internal control procedures?

A company's internal control system is designed by its external auditors.

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. Although the department supervisor can indicate a preferred supplier or vendor on purchase requisitions, the purchasing department has the responsibility for making the final decision on a vendor.

controls primarily concern safeguarding of assets and ensuring the reliability of the financial statements.

Which one of the following could never be considered to be cash equivalents?

is a report required by section 404 of the Sarbanes-Oxley Act.

Which one of the following statements regarding internal control is true?