Question 1

Define an internal control system and describe its purpose.

Accepted Answer

An internal control system refers to the

Question 2

Franklin Company deposits all cash receipts on the day they are received and makes all cash payments by check.At the close of business on August 31,its Cash account shows a debit balance of $13,162.Franklin's August bank statement shows $14,237 on deposit in the bank.Determine the adjusted cash balance using the following information:   The adjusted cash balance should be:

Accepted Answer

A) $18,737 
B) $10,337 
C) $14,887 
D) $13,112 
E) $14,837 
A) $18,737 
B) $10,337 
C) $14,887 
D) $13,112 
E) $14,837

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A ________ is a document explaining the payment of a check.

Accepted Answer

The answer of A ________ is a document explaining the...

Question 5

It is generally not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

Accepted Answer

A) True 
 B)False

Question 6

Identify whether each of the following items 1 through 8 would on appear on the bank side or the book side of a bank reconciliation.
____ 1.Bank service charges
____ 2.Outstanding checks
____ 3.Deposits in transit
____ 4.NSF check
____ 5.Interest on a checking account
____ 6.The company properly wrote a check for $95.80 that the bank incorrectly paid as $9.58.
____ 7.The bank printed checks for the depositor for a fee.
____ 8.The bank collected a $1,000 note for the depositor.

Accepted Answer

1.Book; 2.Bank; 3.Ba

Question 7

Liquidity

Accepted Answer

A) Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records. 
B) Short-term, highly liquid investment assets that are readily convertible to cash and close enough to their due date so that their market value will not greatly change. 
C) An internal document used to collect information to control cash payments and to ensure that a transaction is properly recorded. 
D) An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change. 
E) A measure of how quickly a company can convert its accounts receivable into cash.
F)Principle that says the costs of internal controls must not exceed their benefits
G)A set of procedures and approvals designed to control cash payments and the acceptance of liabilities.
H)Used by the bank to verify signatures of persons authorized to write checks.
I)A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.
J)The ability of a company to pay for its near-term obligations. 
A) Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records. 
B) Short-term, highly liquid investment assets that are readily convertible to cash and close enough to their due date so that their market value will not greatly change. 
C) An internal document used to collect information to control cash payments and to ensure that a transaction is properly recorded. 
D) An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change. 
E) A measure of how quickly a company can convert its accounts receivable into cash.
F)Principle that says the costs of internal controls must not exceed their benefits
G)A set of procedures and approvals designed to control cash payments and the acceptance of liabilities.
H)Used by the bank to verify signatures of persons authorized to write checks.
I)A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.
J)The ability of a company to pay for its near-term obligations.

Question 8

A voucher system establishes procedures for verifying,approving,and recording liabilities for eventual cash payment.

Accepted Answer

A) True 
 B)False

Question 9

A ________ is an internal document (or file)that is used to accumulate information to control cash payments.

Accepted Answer

The answer of A ________ is an internal document (or...

Question 10

Voucher

Accepted Answer

A) Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records. 
B) Short-term, highly liquid investment assets that are readily convertible to cash and close enough to their due date so that their market value will not greatly change. 
C) An internal document used to collect information to control cash payments and to ensure that a transaction is properly recorded. 
D) An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change. 
E) A measure of how quickly a company can convert its accounts receivable into cash.
F)Principle that says the costs of internal controls must not exceed their benefits
G)A set of procedures and approvals designed to control cash payments and the acceptance of liabilities.
H)Used by the bank to verify signatures of persons authorized to write checks.
I)A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.
J)The ability of a company to pay for its near-term obligations. 
A) Fundamental guidelines applicable to all companies established to minimize the risk of fraud and theft and to increase the reliability and accuracy of the accounting records. 
B) Short-term, highly liquid investment assets that are readily convertible to cash and close enough to their due date so that their market value will not greatly change. 
C) An internal document used to collect information to control cash payments and to ensure that a transaction is properly recorded. 
D) An income statement account used to record the income effects of cash overages and cash shortages arising from missing petty cash receipts or errors in making change. 
E) A measure of how quickly a company can convert its accounts receivable into cash.
F)Principle that says the costs of internal controls must not exceed their benefits
G)A set of procedures and approvals designed to control cash payments and the acceptance of liabilities.
H)Used by the bank to verify signatures of persons authorized to write checks.
I)A report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.
J)The ability of a company to pay for its near-term obligations.

Question 11

When reimbursing the petty cash fund:

Accepted Answer

A) Cash is debited. 
B) Petty Cash is credited. 
C) Petty Cash is debited. 
D) Appropriate expense accounts are debited. 
E) No expenses are recorded. 
A) Cash is debited. 
B) Petty Cash is credited. 
C) Petty Cash is debited. 
D) Appropriate expense accounts are debited. 
E) No expenses are recorded.

Question 12

A company reported net sales for Year 1 of $265,000 and $545,000 for Year 2.The year-end balances of accounts receivable were $39,000 for Year 1 and $92,000 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.

Accepted Answer

Days' Sales Uncollected Ratio = Ending A

Question 13

The Petty Cash account is a separate bank account used for small amounts.

Accepted Answer

A) True 
 B)False

Question 14

Interest earned on the cash balance in the bank is recorded by the bank as:

Accepted Answer

A) An increase in the bank's asset account. 
B) A decrease in the bank's asset account. 
C) A decrease in the depositor's bank account. 
D) An increase in the depositor's bank account. 
E) An increase in the bank's expense account. 
A) An increase in the bank's asset account. 
B) A decrease in the bank's asset account. 
C) A decrease in the depositor's bank account. 
D) An increase in the depositor's bank account. 
E) An increase in the bank's expense account.

Question 15

Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount,and have maturities of one year.

Accepted Answer

A) True 
 B)False

Question 16

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period,in preparing this period's reconciliation,the amount of this check should be:

Accepted Answer

A) Added to the book balance of cash as an outstanding check. 
B) Deducted from the book balance of cash as an outstanding check. 
C) Added to the bank balance of cash as an outstanding check. 
D) Deducted from the bank balance of cash as an outstanding check. 
E) Ignored in preparing the period's bank reconciliation as an outstanding check. 
A) Added to the book balance of cash as an outstanding check. 
B) Deducted from the book balance of cash as an outstanding check. 
C) Added to the bank balance of cash as an outstanding check. 
D) Deducted from the bank balance of cash as an outstanding check. 
E) Ignored in preparing the period's bank reconciliation as an outstanding check.

Question 17

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 18

Havermill Co.establishes a $250 petty cash fund on September 1.On September 30,the fund is replenished.The accumulated receipts on that date represent $73 for Office Supplies,$137 for merchandise inventory,and $22 for miscellaneous expenses.The fund has a balance of $18.On October 1,the accountant determines that the fund should be increased by $50.
-The journal entry to record the increase in the fund balance on October 1 is:

Accepted Answer

A) Debit Petty Cash $300; credit Cash $300. 
B) Debit Cash $50; credit Petty Cash $50. 
C) Debit Miscellaneous Expense $50; credit Cash $50. 
D) Debit Petty Cash $50; credit Accounts Payable $50. 
E) Debit Petty Cash $50; credit Cash $50. 
A) Debit Petty Cash $300; credit Cash $300. 
B) Debit Cash $50; credit Petty Cash $50. 
C) Debit Miscellaneous Expense $50; credit Cash $50. 
D) Debit Petty Cash $50; credit Accounts Payable $50. 
E) Debit Petty Cash $50; credit Cash $50.

Question 19

All of the following are considered effective cash management principles except:

Accepted Answer

A) Encouraging collection of receivables by offering discounts for early payments. 
B) Keeping only necessary assets. 
C) Planning expenditures. 
D) Retaining excess cash for unexpected expenditures. 
E) Delaying payment of liabilities until the last possible day. 
A) Encouraging collection of receivables by offering discounts for early payments. 
B) Keeping only necessary assets. 
C) Planning expenditures. 
D) Retaining excess cash for unexpected expenditures. 
E) Delaying payment of liabilities until the last possible day.

Question 20

A purchase order is a document the purchasing department sends to the vendor to place an order.

Accepted Answer

A) True 
 B)False

Exam 6: Cash,fraud,and Internal Controls

Define an internal control system and describe its purpose.

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

A ________ is a document explaining the payment of a check.

It is generally not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

Liquidity

A voucher system establishes procedures for verifying,approving,and recording liabilities for eventual cash payment.

A ________ is an internal document (or file)that is used to accumulate information to control cash payments.

Voucher

When reimbursing the petty cash fund:

The Petty Cash account is a separate bank account used for small amounts.

Interest earned on the cash balance in the bank is recorded by the bank as:

Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount,and have maturities of one year.

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period,in preparing this period's reconciliation,the amount of this check should be:

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

All of the following are considered effective cash management principles except:

A purchase order is a document the purchasing department sends to the vendor to place an order.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

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