Question 1

The voucher system of control:

Accepted Answer

A)  Is a set of procedures and approvals designed to control cash receipts and the acceptance of obligations. 
B)  Establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement. 
C)  Establishes procedures for receiving checks for the sale of verified, approved, and recorded activities. 
D)  Applies only when multiple purchases are made from the same supplier. 
E)  All of these. 
A)  Is a set of procedures and approvals designed to control cash receipts and the acceptance of obligations. 
B)  Establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement. 
C)  Establishes procedures for receiving checks for the sale of verified, approved, and recorded activities. 
D)  Applies only when multiple purchases are made from the same supplier. 
E)  All of these.

Question 2

The document that the purchasing department prepares and sends to the vendor to place an order is the

Accepted Answer

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

Question 3

Fraud does not include collusion, which is necessary to thwart separation of duties.

Accepted Answer

A) True 
 B)False

Question 4

Two important limitations of internal control systems are (1) human error or human fraud, and (2) cost-benefit.

Accepted Answer

A) True 
 B)False

Question 5

The following information is available for the Avisa Company for the month of November.
a. On November 30, after all transactions have been recorded, the balance in the company's Cash account has a balance of $27,202.
b. The company's bank statement shows a balance on November 30 of $29,279.
c. Outstanding checks at November 30 include check #3030 in the amount of $1,525 and check #3556 in the amount of $1,459.
d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest-bearing note receivable for Avisa. The bank deducted a $10 collection fee, and credited the remainder of $770 to Avisa's account.
e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown.
f. A deposit placed in the bank's night depository on November 30 totaled $1,675, and did not appear on the bank statement.
g. Examination of the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540.
h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company's books.
1. Prepare the November bank reconciliation for the Avisa Company.
2. Prepare the general journal entries to bring the company's book balance of cash into conformity with the reconciled balance as of November 30.

Accepted Answer

The answer of The following information is available for the...

Question 6

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

Accepted Answer

A)  Added to the book balance of cash. 
B)  Deducted from the book balance of cash. 
C)  Added to the bank balance of cash. 
D)  Deducted from the bank balance of cash. 
E)  Noted in memorandum form only. 
A)  Added to the book balance of cash. 
B)  Deducted from the book balance of cash. 
C)  Added to the bank balance of cash. 
D)  Deducted from the bank balance of cash. 
E)  Noted in memorandum form only.

Question 7

After preparing a bank reconciliation, adjustments must be made for items reconciling the bank balance and items reconciling the book balance.

Accepted Answer

A) True 
 B)False

Question 8

The journal entry for petty cash reimbursement involves a debit to the appropriate expenses and a credit to Petty Cash.

Accepted Answer

A) True 
 B)False

Question 9

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of general and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 10

Cash equivalents:

Accepted Answer

A)  Include savings accounts. 
B)  Include checking accounts. 
C)  Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. 
D)  Include time deposits. 
E)  Have no immediate value. 
A)  Include savings accounts. 
B)  Include checking accounts. 
C)  Are short-term investments sufficiently close to their maturity date that their value is not sensitive to interest rate changes. 
D)  Include time deposits. 
E)  Have no immediate value.

Question 11

Following are seven items a through g that would cause Xavier Company's book balance of cash to differ from its bank statement balance of cash.
a. A service charge imposed by the bank.
b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month.
c. A customer's check returned by the bank is marked "Not Sufficient Funds(NSF)".
d. A deposit that was mailed to the bank on the last day of the current month and is unrecorded on this month's bank statement.
e. A check paid by the bank at its correct $190 amount was recorded in error in the company's Check Register at $109.
f. An unrecorded credit memorandum indicated that bank had collected a note receivable for Xavier Company and deposited the proceeds in the company's account.
g. A check was written in the current period that is not yet paid or returned by the bank.
Indicate where each item a through g would appear on Xavier Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

Accepted Answer

The answer of Following are seven items a through g...

Question 12

Discuss the purpose of a bank reconciliation.

Accepted Answer

A bank reconciliation is a report explai

Question 13

Internal control devices for banking activities include signature cards, deposit tickets, checks, and bank statements.

Accepted Answer

A) True 
 B)False

Question 14

A _____________________________ fund is used for the control of small amounts of cash disbursements.

Accepted Answer

The answer of A _____________________________ fund is used for the...

Question 15

Internal control systems are:

Accepted Answer

A)  Developed by the Securities and Exchange Commission for public companies. 
B)  Developed by the Small Business Administration for non-public companies. 
C)  Developed by the Internal Revenue Service for all U.S. companies. 
D)  Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange. 
E)  Required only if a company plans to engage in interstate commerce. 
A)  Developed by the Securities and Exchange Commission for public companies. 
B)  Developed by the Small Business Administration for non-public companies. 
C)  Developed by the Internal Revenue Service for all U.S. companies. 
D)  Required by Sarbanes-Oxley (SOX) to be documented and certified if the company's stock is traded on an exchange. 
E)  Required only if a company plans to engage in interstate commerce.

Question 16

Under the net method an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Inventory and a credit to Accounts Payable of $2,000.
$2,000 x .98 = $1,960

Accepted Answer

A) True 
 B)False

Question 17

Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.

Accepted Answer

Banking activities can be organized into

Question 18

Cash, not including cash equivalents, includes:

Accepted Answer

A)  Postage stamps. 
B)  Coins, currency, and checking accounts. 
C)  IOUs. 
D)  Two-year certificates of deposit. 
E)  Money market funds. 
A)  Postage stamps. 
B)  Coins, currency, and checking accounts. 
C)  IOUs. 
D)  Two-year certificates of deposit. 
E)  Money market funds.

Question 19

Bonding does not discourage loss from theft because employees know that bonding is an insurance policy against loss from theft.

Accepted Answer

A) True 
 B)False

Question 20

The following information is taken from Hogan Company's December 31 balance sheet:   If net credit sales and cost of goods sold for the current year were $612,000 and $367,200, respectively, the firm's days' sales uncollected for the year is:

Accepted Answer

A)  60 days 
B)  85 days 
C)  42 days 
D)  154 days 
E)  70 days 
A)  60 days 
B)  85 days 
C)  42 days 
D)  154 days 
E)  70 days

Exam 8: Cash and Internal Controls

The voucher system of control:

The document that the purchasing department prepares and sends to the vendor to place an order is the

Fraud does not include collusion, which is necessary to thwart separation of duties.

Two important limitations of internal control systems are (1) human error or human fraud, and (2) cost-benefit.

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

After preparing a bank reconciliation, adjustments must be made for items reconciling the bank balance and items reconciling the book balance.

The journal entry for petty cash reimbursement involves a debit to the appropriate expenses and a credit to Petty Cash.

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of general and administrative expenses.

Cash equivalents:

Discuss the purpose of a bank reconciliation.

Internal control devices for banking activities include signature cards, deposit tickets, checks, and bank statements.

A _____________________________ fund is used for the control of small amounts of cash disbursements.

Internal control systems are:

Under the net method an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Inventory and a credit to Accounts Payable of $2,000. $2,000 x .98 = $1,960

Describe the banking activities that promote the control of cash and identify the internal control objectives served by the banking activities.

Cash, not including cash equivalents, includes:

Bonding does not discourage loss from theft because employees know that bonding is an insurance policy against loss from theft.

The following information is taken from Hogan Company's December 31 balance sheet: If net credit sales and cost of goods sold for the current year were $612,000 and $367,200, respectively, the firm's days' sales uncollected for the year is:

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 Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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