Question 1

Proper internal control means that responsibility for a task is clearly established and assigned to one person.

Accepted Answer

A) True 
 B)False

Question 2

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of general and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 3

Internal control in technologically advanced accounting systems depends more on the design and operation of the information system and less on the analysis of its resulting documents.

Accepted Answer

A) True 
 B)False

Question 4

Define an internal control system and describe its purpose.

Accepted Answer

An internal control system refers to the

Question 5

A properly designed internal control system:

Accepted Answer

A) Lowers the company's risk of loss. 
B) Insures profitable operations. 
C) Eliminates the need for an audit. 
D) Requires the use of non-computerized systems. 
E) Is not necessary if the company uses a computerized system. 
A) Lowers the company's risk of loss. 
B) Insures profitable operations. 
C) Eliminates the need for an audit. 
D) Requires the use of non-computerized systems. 
E) Is not necessary if the company uses a computerized system.

Question 6

Brown Company's bank statement for September 30 showed a cash balance of $1,350.The company's Cash account in its general ledger showed a $995 debit balance.The following information was also available as of September 30.
a.A $125 debit memoranda is included with the bank statement and dealt with a customer's check for $100 marked NSF and returned to Brown Company by the bank.In addition,the bank charged the company's a $25 processing fee.
b.The September 30 cash receipts,$1,250,were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement.
c.A $15 debit memorandum for checks printed by the September 30 bank was included with the canceled checks.
d.Outstanding checks amounted to $1,145.
e.A customer's note for $900 was collected by the bank.A collection fee of $25 was deducted by the bank and the difference was deposited in the account.
f.Included with the canceled checks was a check for $275,drawn on another company,Browne Inc.
1.Prepare a bank reconciliation as of September 30.
2.Prepare any necessary adjusting journal entries necessary as a result of the bank reconciliation.

Accepted Answer

The answer of Brown Company's bank statement for September 30...

Question 7

Which of the following events would cause a bank to debit a depositor's account?

Accepted Answer

A) The depositor authorizes the bank to charge the depositor's account $50 for new checks. 
B) The bank collects a note receivable and related interest on the depositor's behalf. 
C) The depositor determines there are outstanding checks drawn on the account at month-end. 
D) The depositor determines there are deposits in transit on the account at month-end. 
E) The bank determines it incorrectly charged the depositor's account twice for the monthly service charge in a previous month. 
A) The depositor authorizes the bank to charge the depositor's account $50 for new checks. 
B) The bank collects a note receivable and related interest on the depositor's behalf. 
C) The depositor determines there are outstanding checks drawn on the account at month-end. 
D) The depositor determines there are deposits in transit on the account at month-end. 
E) The bank determines it incorrectly charged the depositor's account twice for the monthly service charge in a previous month.

Question 8

Two important limitations of internal control systems are (1)human error or human fraud,and (2)cost-benefit.

Accepted Answer

A) True 
 B)False

Question 9

A check involves 3 parties:
 the maker who signs the check,the payee who is the recipient,and the bank on which the check is drawn.

Accepted Answer

A) True 
 B)False

Question 10

Managers place a high priority on internal control systems because the systems assist managers in the:

Accepted Answer

A) Prevention of avoidable losses. 
B) Planning of operations. 
C) Monitoring of company performance. 
D) Monitoring of employee performance. 
E) Assurance that no loss will occur. 
A) Prevention of avoidable losses. 
B) Planning of operations. 
C) Monitoring of company performance. 
D) Monitoring of employee performance. 
E) Assurance that no loss will occur.

Question 11

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Accepted Answer

A) True 
 B)False

Question 12

What is a voucher system?

Accepted Answer

A voucher system is a set of procedures

Question 13

On a bank reconciliation,the amount of an unrecorded bank service charge should be:

Accepted Answer

A) Added to the book balance of cash. 
B) Deducted from the book balance of cash. 
C) Added to the bank balance of cash. 
D) Deducted from the bank balance of cash. 
E) Noted in memorandum form only. 
A) Added to the book balance of cash. 
B) Deducted from the book balance of cash. 
C) Added to the bank balance of cash. 
D) Deducted from the bank balance of cash. 
E) Noted in memorandum form only.

Question 14

The following information is available to reconcile Litner Co.'s book balance of cash with its bank statement cash balance as of April 30.The April 30 cash balance according to the accounting records is $78,356,and the bank statement cash balance for that date is $83,525.
a.The bank erroneously cleared a $480 check against the account in April that was not issued by Litner.The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b.On April 30,the bank issued a credit memorandum for $53 interest earned on Litner's account.
c.When the April checks are compared with entries in the accounting records,it is found that Check No.1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350
d.A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner,deducted a $30 collection fee,and credited the balance to the company's Cash account.Litner did not record this transaction before receiving the statement.
e.A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer.The bank assessed a $25 fee for processing it.
f.Litner's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date,but do not appear on the April 30 bank statement.
g.Litner's April 30 cash disbursements journal indicates that Check No.1837 for $584 and Check No.1840 for $1,219 were both written and entered in the accounting records,but are not among the canceled checks.
1.Prepare the bank reconciliation for this company as of April 30.
2.Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of April 30.

Accepted Answer

The answer of The following information is available to reconcile...

Question 15

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Accepted Answer

A) Internal audit. 
B) Bank reconciliation. 
C) Bank audit. 
D) Trial reconciliation. 
E) Analysis of debits and credits. 
A) Internal audit. 
B) Bank reconciliation. 
C) Bank audit. 
D) Trial reconciliation. 
E) Analysis of debits and credits.

Question 16

The days' sales uncollected ratio is used to:

Accepted Answer

A) Measure how many days of sales remain until the end of the year. 
B) Determine the number of days that have passed without collecting on accounts receivable. 
C) Identify the likelihood of collecting sales on account. 
D) Estimate how much time is likely to pass before the amount of accounts receivable is received in cash. 
E) Measure the amount of layaway sales for a period. 
A) Measure how many days of sales remain until the end of the year. 
B) Determine the number of days that have passed without collecting on accounts receivable. 
C) Identify the likelihood of collecting sales on account. 
D) Estimate how much time is likely to pass before the amount of accounts receivable is received in cash. 
E) Measure the amount of layaway sales for a period.

Question 17

Outstanding checks refer to checks that have been:

Accepted Answer

A) Written, recorded, sent to payees, and received and paid by the bank. 
B) Written and not yet recorded in the company books. 
C) Held as blank checks. 
D) Written, recorded on the company books, sent to the payee, but have not yet been paid by the bank. 
E) Issued by the bank. 
A) Written, recorded, sent to payees, and received and paid by the bank. 
B) Written and not yet recorded in the company books. 
C) Held as blank checks. 
D) Written, recorded on the company books, sent to the payee, but have not yet been paid by the bank. 
E) Issued by the bank.

Question 18

The _____________ of recording purchases records purchases under the assumption that the cash discount for prompt payment will be taken.

Accepted Answer

The answer of The _____________ of recording purchases records purchases...

Question 19

When a voucher system is used,recording a purchase is initiated by an invoice approval and a voucher,not an invoice.

Accepted Answer

A) True 
 B)False

Question 20

The following information is available for Holland Company at December 31:
  Based on this information,Holland Company should report Cash and Cash Equivalents on December 31 of:

Accepted Answer

A) $35,421 
B) $50,421 
C) $37,546 
D) $36,246 
E) $40,439 
A) $35,421 
B) $50,421 
C) $37,546 
D) $36,246 
E) $40,439

Exam 8: Cash and Internal Controls

Proper internal control means that responsibility for a task is clearly established and assigned to one person.

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of general and administrative expenses.

Internal control in technologically advanced accounting systems depends more on the design and operation of the information system and less on the analysis of its resulting documents.

Define an internal control system and describe its purpose.

A properly designed internal control system:

Which of the following events would cause a bank to debit a depositor's account?

Two important limitations of internal control systems are (1)human error or human fraud,and (2)cost-benefit.

A check involves 3 parties: the maker who signs the check,the payee who is the recipient,and the bank on which the check is drawn.

Managers place a high priority on internal control systems because the systems assist managers in the:

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

What is a voucher system?

On a bank reconciliation,the amount of an unrecorded bank service charge should be:

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

The days' sales uncollected ratio is used to:

Outstanding checks refer to checks that have been:

The _____________ of recording purchases records purchases under the assumption that the cash discount for prompt payment will be taken.

When a voucher system is used,recording a purchase is initiated by an invoice approval and a voucher,not an invoice.

The following information is available for Holland Company at December 31: Based on this information,Holland Company should report Cash and Cash Equivalents on December 31 of:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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