Exam 6: Cash, fraud, and Internal Controls

Internal control policies and procedures have limitations not including:

Describe a bank reconciliation and discuss its purpose.

The following information is taken from Reagan Company's December 31 balance sheet: Cash and cash equivalents \ 8,419 Accounts receivable 70,422 Merchandise inventories 60,362 Prepaid expenses 4,100 Accounts payable \ 14,950 Notes payable 86,638 Other current liabilities 9,500 If net credit sales for the current year were $612,000,the firm's days' sales uncollected for the year is: (Use 365 days a year.)

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

At the end of the day,the cash register tape shows $1,000 in cash sales but the count of cash in the register is $1,010.The proper entry to account for this excess is:

Most large thefts occur from payment of fictitious invoices,which makes control of cash disbursements especially important for companies.

Childers Company,which uses a perpetual inventory system,has an established petty cash fund in the amount of $400.The fund was last reimbursed on November 30.At the end of December,the fund contained the following petty cash receipts: December 4 Freight charge for merchandise purchased \ 62 December 7 Delivery charge for shipping to customer \ 46 December 12 Purchase of office supplies \ 30 December 18 Donation to charitable organization \ 51 If,in addition to these receipts,the petty cash fund contains $201 of cash,the journal entry to reimburse the fund on December 31 will include:

On June 3,Zhang Co.received and recorded a $3,500 invoice for merchandise on which the terms were 2/10,n/60.The company uses the net method to records invoices.On June 17,the company discovered that the invoice had been incorrectly filed and the discount lost.Prepare the June 3 general journal entry to record the purchase,the June 17 entry to record the discount lost,and the August 2 entry to record payment of the invoice.

When a petty cash fund is in use:

Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

Match each of the following transactions with the applicable internal control principle that is being violated listed. A.Establish responsibility B.Maintain adequate records C.Insure assets and bond employees D.Separate recordkeeping from custody of assets E.Divide responsibility for related transactions F.Apply technological controls G.Perform regular and independent reviews _____ 1.Cashiers have access to the cash register recorded tape or file. _____ 2.A company uses a voucher system,but the cash disbursement clerk pays directly from invoices received. _____ 3.Only sales clerks use the cash registered,but they all share the same cash drawer. _____ 4.The bookkeeper prepares and signs checks and completes the bank reconciliation. _____ 5.A restaurant allows servers to keep cash collected in their aprons and ring in all sales at the end of the night. _____ 6.A company fails to hire a CPA to perform an annual audit. _____ 7.A company does not bond its key cash-handling employees. _____ 8.A company has a single department that handles purchasing,receiving,and inventory management. _____ 9.A large company has no internal auditor on staff. _____ 10.A company manager keeps pre-signed checks in his desk drawer for employees to hand write when the accountant is out of the office.

Describe the net method of accounting for purchases.Why might companies use the net method?

Match each of the following terms with the appropriate definitions. -A measure of how quickly a company can convert its accounts receivable into cash.

Describe a petty cash account and its purpose.

Match each of the following terms with the appropriate definitions. -The ability of a company to pay for its near-term obligations.

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 reimbursement of the fund on September 30 includes a:

If the Cash Over and Short account has a credit balance at the end of the period,the amount is commonly reported as miscellaneous revenue.

Which internal control principle prescribes the use of pre-numbered printed checks?

Canceled checks are checks the bank has paid and deducted from the customer's account during the period.

When using a voucher system,what are the steps on the invoice approval checklist that must be completed before an invoice approval is complete and a voucher prepared?