Exam 8: Cash and Internal Controls

The clerk who has access to the cash in the cash register should not have access to the cash register tape or file.

Marbel had $2,816 million in sales and $555 million in ending accounts receivable for the current period. For the same period, Maxtel reported $4,885 million in sales and $491 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period. Which company is doing a better job in managing the collection of its receivables?

Money orders, cashier's checks, and certified checks are examples of cash equivalents.

Vouchers should be used only for purchases. Other expenditures do not need to go through the voucher system.

To streamline a voucher system, procedures for purchasing, receiving, and paying for merchandise can be performed by one department or individual.

The document the purchasing department sends to the vendor that is used to place an order is the _________________________.

The days' sales uncollected ratio measures the liquidity of accounts receivable.

Dylan Lauren of Dylan's Candy Bar knew good business practice requires the use of effective internal controls. Identify some of the internal controls that Dylan's Candy Bar implemented and explain how those controls contributed to the firm's success.

What is the purpose of the petty cash account?

The Cash Over and Short account:

A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

A company that uses the net method of recording invoices made a purchase of $400 with terms of 2/10, n/30. The entry to record the purchase would include:

When merchandise is needed, a department manager must inform the purchasing department of its needs by preparing and signing a purchase requisition which lists the merchandise needed and requests that it be purchased.

A company established a petty cash fund in April of the current year and experienced the following transactions affecting the fund during April. Prepare journal entries to establish the fund on April 1, to replenish it on April 25, and to record the increase in the fund on April 25.

________________ includes currency, coins, and amounts on deposit in checking accounts and many savings accounts.

The entry to record reimbursement of the petty cash fund for postage expense should include:

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 _______________________.

A ____________ is a report explaining any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement.

Maxtel had net sales of $4,235 million and ending accounts receivable of $775 million. Its days' sales uncollected equals:

The following account balances are taken from Mesky Sports at December 31. Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.