Exam 7: Internal Control

The Sharon Advocate has established a petty cash fund for small expenditures. In the journal provided, prepare the entries for the following transactions. (Omit explanations.)

Cash and inventory are very vulnerable to theft.

When a petty cash fund is replenished, the entry requires a credit to Cash.

Indicate the letter of where each of the following documents would be prepared and the letter of where it would be sent. a. Requesting department b. Purchasing department c. Receiving department d. Accounting department e. Treasurer f. Vendor

When a petty cash fund is replenished, the entry requires a debit to Petty Cash.

Cash Short or Over would be debited for a shortage.

Which of the following documents would be sent to the treasurer?

Which of the following sets of documents are in the correct sequence?

A physical inventory is usually taken

The purchasing department prepares a purchase requisition addressed to the vendor (seller) containing instructions related to the items ordered.

Which of the following attributes of internal control would be violated if the chief accounting clerk wrote checks to pay accounts payable?

Indicate whether each business practice listed below strengthens (S) or weakens (W) a company's system of internal control. a. Bonding of employees _____ b. Limiting the number of people who have access to cash _____ c. Combining the recordkeeping and custodianship functions _____ d. Making all payments with cash _____ e. Keeping rotation of key employees to a minimum _____ _____ f. Using prenumbered sales tickets

Under the perpetual inventory system, inventory losses can be identified more easily than under the periodic inventory system.

The entry for establishing a $200 petty cash fund would be

When a petty cash fund is not replenished at the end of the accounting period, the adjusting entry would contain a credit to Petty Cash.

Merchandising companies do not need as good a system of internal control as service companies.

All of the following are examples of internal control activities, except

Use the following information regarding Sanders Company to answer the question below. 1) Established a petty cash fund in the amount of $200. 2) Reimbursed the petty cash fund given the following petty cash fund disbursements: A) Payment for postage, $20. B) Payment for supplies, $70. 3) Increased the petty cash fund by $100. 4) Cash over at the end of the first period was $5. The entry to record the cash over in the petty cash fund would include a A)credit to the Cash account for $5. B)credit to the Petty Cash account for $5. C)debit to Cash Short or Over for $5. D)credit to Cash Short or Over for $5.

A formal request for a purchase from the requesting department of a business is known as a purchase requisition.

One example of a periodic independent verification is the bank reconciliation.