Exam 8: Cash and Internal Controls

The entry to record reimbursement of the petty cash fund for postage expense should include:

The document,also known as the check authorization,that is a checklist of steps necessary for approving an invoice for recording and payment is the

The number of days' sales uncollected is calculated by:

A company established a petty cash fund in February of the current year and experienced the following transactions affecting the fund during February: Feb 1 Established a $250 petty cash fund. 5 Paid $55 to acquire office supplies. 8 Reimbursed the company controller for $30 spent on beverages for recruits 18 Paid $45 for postage. 20 Paid $65 for C.O.D.charges on merchandise inventory, terms FOB shipping point.25 Paid $50 for janitorial services.28 When sorting the petty cash receipts to replenish the fund, the custodian noted that there were receipts totaling $245 and $10 cash remaining.Also, a decision was made to reduce the fund by $50 to a total of $200.Prepare the journal entries to establish the find, reimburse the fund and to reduce its amount on February 28.

All disbursements from petty cash should be documented by a petty cash receipt.

Internal control procedures for cash receipts require that:

A voucher is an internal file:

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.

Basic bank services include:

For each of the independent cases below,identify the principle of internal control that is violated,and recommend what should be done to remedy the violation. 1.In order to save money,Regal Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle about $10,000 in cash each day. 2.Halton Company records each sale on a preprinted invoice.Since sometimes invoices are damaged in the process of being prepared,the invoices are not prenumbered,but the sales clerk writes the next number onto each invoice. 3.Marion Company is a very small business.Bob Lepley,one of the two office clerks,opens the mail each day and removes the cash receipts that come in the mail.Bob then records the receipts in the cash records and the customer's account and deposits the cash in the bank. 4.Gerald McNichols,the owner of McNichols Company prides himself on hiring only the most competent employees.McNichols believes that since these employees are highly competent and to show that he trusts them completely,he feels there is no need for anyone to check up on the employees' performance. 5.Service Products is a small business with only 3 accounting employees.Each employee is well-trained and so can perform any of the accounting tasks,including handling cash receipts and cash disbursements,and preparing the bank reconciliation.

Dylan Lauren of Dylan's Candy Bar knew good business practice requires the use of effective internal controls.Identify some of the internal controls that Dylan's Candy Bar should implement and explain how those controls contributed to the firm's success.

A ____________ is a report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

Pre-numbered printed checks are an example of which internal control principle?

In order to streamline the purchasing process,department managers should place orders directly with suppliers.

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

A check involves three parties:

The number of days' sales uncollected:

A company that uses the net method of recording invoices made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would include:

A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2.The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2.Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

_______________________ are deposits made and recorded by the depositor but not yet recorded on the bank statement.