Exam 8: Cash and Internal Controls

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

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

When a voucher system is used, an invoice approval is not needed as long as the purchase is evidenced by an invoice and purchase order.

Discuss how the principles of internal control apply to cash receipts over-the-counter by giving several examples of good control measures that should be implemented.

The following information is available for Birch Company at December 31: Money market fund balance \ 2,790 Certificate of deposit maturing June 30 of next year \ 10,000 Postdated checks from eustomers \ 1,475 Cash in bank account \ 21,430 NSF checks from eustomers returned by bank \ 650 Cash in petty cash fund \ 200 Inventory of postage stamps \ 24 U.S. Treasury bill purchased on December 15 and maturing on February 28 of following year \ 5,000 Based on this information, Birch Company should report Cash and Cash Equivalents on December 31 of:

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

Petty cash reimbursement requires a journal entry that involves a debit to the appropriate expenses and a credit to Cash.

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

Match the following terms with the appropriate definition. 1. The set of policies and procedures managers use to monitor and control business activities. 2. The supplier (seller) of goods or services. 3. An expense used under the net method of accounting for purchases resulting from failure to take advantage of cash discounts offered. 4. Currency, coins, and amounts on deposit in bank accounts. 5. An asset such as cash that can be readily used to settle near-term obligations. 6. Regulation requiring public companies to document and certify their system of internal controls. 7. An internal document listing the goods needed by a department and requesting that the goods be purchased. 8. Short-term, highly liquid investments that are readily convertible to a known cash amount and are sufficiently close to their maturity date so that the market value is not sensitive to interest rate changes. 9. A bill sent from the supplier to the buyer. 10. A device that perforates the amount of a check into its face, making it difficult to alter.

The clerk who has access to the cash in the cash register should also have access to the cash register tape or file.

Internal control systems are:

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.

Assume that the custodian of a $450 petty cash fund has $62 in coins and currency plus $383 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

A properly designed internal control system is a key part of systems design, analysis, and performance.

A company's internal control system:

List the principles of internal control.

Meng Co. maintains a $300 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $80 for office supplies, $160 for merchandise inventory, and $20 for miscellaneous expenses. There is a cash shortage of $8. -The journal entry to replenish the fund on January 31 is:

An ________ refers to the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

An invoice is an itemized statement of goods prepared by the customer listing the customer's name, items sold, sales prices, and terms of sale.

The payee is the person who signs a check, authorizing its payment.