Question 1

Describe a bank reconciliation and discuss its purpose.

Accepted Answer

A bank reconciliation is a report explai

Question 2

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:

Accepted Answer

A)  Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10. 
B)  Debit Cash Over and Short $10; credit Cash $10. 
C)  Debit Cash $1,010; credit Sales $1,010. 
D)  Debit Cash $1,000; credit Sales $1,000. 
E)  Debit Cash $1,000; debit Cash Over and Short for $10; credit Sales $1,010. 
A)  Debit Cash $1,010; credit Sales $1,000; credit Cash Over and Short $10. 
B)  Debit Cash Over and Short $10; credit Cash $10. 
C)  Debit Cash $1,010; credit Sales $1,010. 
D)  Debit Cash $1,000; credit Sales $1,000. 
E)  Debit Cash $1,000; debit Cash Over and Short for $10; credit Sales $1,010.

Question 3

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

Accepted Answer

A) True 
 B)False

Question 4

Proper internal control would require that a department manager inform the purchasing department of its needs for additional merchandise by preparing and signing a purchase requisition which lists the merchandise needed and requests that it be purchased.

Accepted Answer

A) True 
 B)False

Question 5

The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the:

Accepted Answer

A)  Purchase requisition. 
B)  Invoice approval. 
C)  Purchase order. 
D)  Invoice. 
E)  Receiving report. 
A)  Purchase requisition. 
B)  Invoice approval. 
C)  Purchase order. 
D)  Invoice. 
E)  Receiving report.

Question 6

The number of days' sales uncollected is calculated by:

Accepted Answer

A)  Dividing accounts receivable by net sales and multiplying by 365. 
B)  Dividing accounts receivable by net sales. 
C)  Multiplying net sales by accounts receivable and dividing by 365. 
D)  Dividing net sales by accounts receivable. 
E)  Dividing net sales by accounts receivable and multiplying by 365. 
A)  Dividing accounts receivable by net sales and multiplying by 365. 
B)  Dividing accounts receivable by net sales. 
C)  Multiplying net sales by accounts receivable and dividing by 365. 
D)  Dividing net sales by accounts receivable. 
E)  Dividing net sales by accounts receivable and multiplying by 365.

Question 7

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: $\begin{array} { | l | l | r | } 
\hline \text { December } 4 & \text { Freight charge for merchandise purchased } & \$ 62 \
\hline \text { December 7 } & \text { Delivery charge for shipping to customer } & \$ 46 \
\hline \text { December 12 } & \text { Purchase of office supplies } & \$ 30 \
\hline \text { December 18 } & \text { Donation to charitable organization } & \$ 51 \
\hline \text { December 18 } & \text { Donation to charitable organization } & \$ 51 \
\hline
\end{array}$
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:

Accepted Answer

A)  A credit to Cash of $199. 
B)  A credit to Cash Over and Short of $10. 
C)  A debit to Petty Cash of $189. 
D)  A debit to Transportation-In of $62. 
E)  A credit to Office Supplies of $30. 
A)  A credit to Cash of $199. 
B)  A credit to Cash Over and Short of $10. 
C)  A debit to Petty Cash of $189. 
D)  A debit to Transportation-In of $62. 
E)  A credit to Office Supplies of $30.

Question 8

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

Accepted Answer

A)  Add the check amount to the bank balance. 
B)  Deduct the check amount from the book balance of cash. 
C)  Add the check amount to the book balance of cash. 
D)  Make a journal entry in the company records for an error. 
E)  Deduct the check amount from the bank balance. 
A)  Add the check amount to the bank balance. 
B)  Deduct the check amount from the book balance of cash. 
C)  Add the check amount to the book balance of cash. 
D)  Make a journal entry in the company records for an error. 
E)  Deduct the check amount from the bank balance.

Question 9

Plenty Co. established a petty cash fund of $150 on October 1. On October 10, the petty cash fund was replenished when there was $49 remaining and there were petty cash receipts for: office supplies, $47; transportation-in on inventory purchased, $32; and postage, $22. On October 15, the petty cash fund was decreased to $125 in total. Plenty Co. uses the perpetual inventory system. Record the above transactions in general journal form.

Accepted Answer

The answer of Plenty Co. established a petty cash fund...

Question 10

The use of electronic communication to transfer cash from one party to another is called________ .

Accepted Answer

electronic

Question 11

Internal control systems are subject to limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Describe a petty cash account and its purpose.

Accepted Answer

The petty cash account is established to

Question 14

Clayborn Company deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on May 31, its Cash account shows a debit balance of $17,025. Clayborn's May bank statement shows $15,800 on deposit in the bank. Determine the adjusted cash balance using the following information:
$$\begin{array} { | l | r | } 
\hline \text { Deposit in transit } & \$ 5,200 \
\hline \text { Outstanding checks } & \$ 4,600 \
\hline \text { Bank service fees, not yet recorded by company } & \$ 25 \
\hline \text { A NSF check from a customer, not yet recorded by the company } & \$ 600 \
\hline
\end{array}$$ The adjusted cash balance should be:

Accepted Answer

A)  $17,000 
B)  $16,400 
C)  $16,425 
D)  $11,200 
E)  $21,000 
A)  $17,000 
B)  $16,400 
C)  $16,425 
D)  $11,200 
E)  $21,000

Question 15

If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?

Accepted Answer

A)  Subtract $45 from the bank's balance and add $45 to the book's balance. 
B)  Subtract $45 from the bank's balance. 
C)  Add $45 to the book balance. 
D)  Subtract $45 from the book balance. 
E)  Add $45 to the bank's balance. 
A)  Subtract $45 from the bank's balance and add $45 to the book's balance. 
B)  Subtract $45 from the bank's balance. 
C)  Add $45 to the book balance. 
D)  Subtract $45 from the book balance. 
E)  Add $45 to the bank's balance.

Question 16

A person who controls or has access to an asset must not keep that asset's accounting records. This describes the internal control principle of ________ .

Accepted Answer

separate r

Question 17

Assume that the custodian of a $450 petty cash fund has $65 in coins and currency plus $382 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

Accepted Answer

A)  A credit to Cash Over and Short for $3. 
B)  A debit to Cash for $382. 
C)  A debit to Petty Cash for $385. 
D)  A credit to Cash for $385. 
E)  A debit to Cash for $450. 
A)  A credit to Cash Over and Short for $3. 
B)  A debit to Cash for $382. 
C)  A debit to Petty Cash for $385. 
D)  A credit to Cash for $385. 
E)  A debit to Cash for $450.

Question 18

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

Accepted Answer

A) True 
 B)False

Question 19

The ________ requires the managers and auditors of companies whose stock is traded on an exchange (called public companies) to document and certify the system of internal controls.

Accepted Answer

Sarbanes-O

Question 20

Internal control policies and procedures have limitations not including:

Accepted Answer

A)  Establishing responsibilities. 
B)  Human error. 
C)  Collusion. 
D)  Cost-benefit principle. 
E)  Human fraud. 
A)  Establishing responsibilities. 
B)  Human error. 
C)  Collusion. 
D)  Cost-benefit principle. 
E)  Human fraud.

Exam 8: Cash and Internal Controls

Describe a bank reconciliation and discuss its purpose.

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:

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls.

Proper internal control would require that a department manager inform the purchasing department of its needs for additional merchandise by preparing and signing a purchase requisition which lists the merchandise needed and requests that it be purchased.

The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the:

The number of days' sales uncollected is calculated by:

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

The use of electronic communication to transfer cash from one party to another is called________ .

Internal control systems are subject to limitations that usually arise from either (1) human error or human fraud, or (2) the cost-benefit principle.

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

Describe a petty cash account and its purpose.

If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?

A person who controls or has access to an asset must not keep that asset's accounting records. This describes the internal control principle of ________ .

Assume that the custodian of a $450 petty cash fund has $65 in coins and currency plus $382 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

The ________ requires the managers and auditors of companies whose stock is traded on an exchange (called public companies) to document and certify the system of internal controls.

Internal control policies and procedures have limitations not including:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

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

Present and Future Values in Accounting

Activity-Based Costing

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