Question 1

All of the following are examples of internal control activities except

Accepted Answer

A) adequate supervision. 
B) rotation of key personnel. 
C) customer satisfaction surveys. 
D) insistence that employees take earned vacations. 
A) adequate supervision. 
B) rotation of key personnel. 
C) customer satisfaction surveys. 
D) insistence that employees take earned vacations.

Question 2

On a bank reconciliation,interest income would be added to the balance per bank.

Accepted Answer

A) True 
 B)False

Question 3

The Report of Management in Brighton Company's annual report states,"Management has established a system of internal controls to provide reasonable assurance that assets are maintained and accounted for in accordance with its policies and that transactions are recorded accurately on the company's books and records." Name five control activities Townsgate could and probably does implement.

Accepted Answer

Any of the following control activities

Question 4

The treasurer should prepare and sign a check only after a proper check authorization has been provided.

Accepted Answer

A) True 
 B)False

Question 5

Proper control procedures can guarantee the prevention of theft.

Accepted Answer

A) True 
 B)False

Question 6

In addition to keeping the records of a purchase transaction,the accounting department should prepare and mail checks in payment of invoices.

Accepted Answer

A) True 
 B)False

Question 7

An understated ending inventory will produce an overstated cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 8

A petty cash fund is established for small payments for which writing a check would be impractical.

Accepted Answer

A) True 
 B)False

Question 9

A check for $236 is incorrectly recorded by the company as $263.On the bank reconciliation,the error would

Accepted Answer

A) appear as a deduction of $27 from the balance per books. 
B) appear as an addition of $27 to the balance per bank. 
C) appear as a deduction of $263 from the balance per books and an addition of $236 to the balance per bank. 
D) appear as an addition of $27 to the balance per books. 
A) appear as a deduction of $27 from the balance per books. 
B) appear as an addition of $27 to the balance per bank. 
C) appear as a deduction of $263 from the balance per books and an addition of $236 to the balance per bank. 
D) appear as an addition of $27 to the balance per books.

Question 10

The entry for establishing a $300 petty cash fund would be:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Management's regular assessment of its internal controls is part of monitoring.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following bank reconciliation items would result in a journal entry?

Accepted Answer

A) Checks outstanding 
B) An adjustment for a check recorded for the wrong amount 
C) Deposits in transit 
D) A bank error on the bank statement 
A) Checks outstanding 
B) An adjustment for a check recorded for the wrong amount 
C) Deposits in transit 
D) A bank error on the bank statement

Question 14

In a small business,active involvement by the owner can be a practical substitute for the separation of some duties.

Accepted Answer

A) True 
 B)False

Question 15

Before a check authorization is issued,the following documents must be in agreement,except for the

Accepted Answer

A) purchase order. 
B) receiving report. 
C) remittance advice. 
D) invoice. 
A) purchase order. 
B) receiving report. 
C) remittance advice. 
D) invoice.

Question 16

A system of internal control cannot be considered good until the possibility of human error has been completely eliminated.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Sound internal control activities dictate that extra cash should always be on hand.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following documents is mailed to the vendor (seller)of goods?

Accepted Answer

A) Receiving report 
B) Invoice 
C) Purchase order 
D) Purchase requisition 
A) Receiving report 
B) Invoice 
C) Purchase order 
D) Purchase requisition

Question 20

In a small business,because it is often cost-prohibitive to hire extra employees,the lack of certain separations of duties can best be overcome by

Accepted Answer

A) bonding the employees. 
B) getting the owner actively involved. 
C) hiring only honest employees. 
D) holding one person responsible for a given set of transactions. 
A) bonding the employees. 
B) getting the owner actively involved. 
C) hiring only honest employees. 
D) holding one person responsible for a given set of transactions.

Exam 7: Cash and Internal Control

All of the following are examples of internal control activities except

On a bank reconciliation,interest income would be added to the balance per bank.

The treasurer should prepare and sign a check only after a proper check authorization has been provided.

Proper control procedures can guarantee the prevention of theft.

In addition to keeping the records of a purchase transaction,the accounting department should prepare and mail checks in payment of invoices.

An understated ending inventory will produce an overstated cost of goods sold.

A petty cash fund is established for small payments for which writing a check would be impractical.

A check for $236 is incorrectly recorded by the company as $263.On the bank reconciliation,the error would

The entry for establishing a $300 petty cash fund would be:

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

Management's regular assessment of its internal controls is part of monitoring.

Which of the following bank reconciliation items would result in a journal entry?

In a small business,active involvement by the owner can be a practical substitute for the separation of some duties.

Before a check authorization is issued,the following documents must be in agreement,except for the

A system of internal control cannot be considered good until the possibility of human error has been completely eliminated.

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

Sound internal control activities dictate that extra cash should always be on hand.

Which of the following documents is mailed to the vendor (seller)of goods?

In a small business,because it is often cost-prohibitive to hire extra employees,the lack of certain separations of duties can best be overcome by

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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