Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Accepted Answer

A) True 
 B)False

Question 3

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Accepted Answer

A)  Debit Cash Over and Short for $43. 
B)  Credit Cash Over and Short for $43. 
C)  Debit Petty Cash for $43. 
D)  Credit Petty Cash for $43. 
E)  Credit Cash for $43. 
A)  Debit Cash Over and Short for $43. 
B)  Credit Cash Over and Short for $43. 
C)  Debit Petty Cash for $43. 
D)  Credit Petty Cash for $43. 
E)  Credit Cash for $43.

Question 4

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Accepted Answer

A)  Internal audit. 
B)  Bank reconciliation. 
C)  Bank audit. 
D)  Trial reconciliation. 
E)  Analysis of debits and credits. 
A)  Internal audit. 
B)  Bank reconciliation. 
C)  Bank audit. 
D)  Trial reconciliation. 
E)  Analysis of debits and credits.

Question 5

A company records purchases using the net method. On February 1, they purchased merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1 journal entry to record this transaction would include a:

Accepted Answer

A)  Debit to Merchandise Inventory of $8,300. 
B)  Debit to Merchandise Inventory of $8,217. 
C)  Debit to Merchandise Inventory of $83. 
D)  Credit to Merchandise Inventory of $83. 
E)  Credit to Accounts Payable of $8,300. 
A)  Debit to Merchandise Inventory of $8,300. 
B)  Debit to Merchandise Inventory of $8,217. 
C)  Debit to Merchandise Inventory of $83. 
D)  Credit to Merchandise Inventory of $83. 
E)  Credit to Accounts Payable of $8,300.

Question 6

Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

Accepted Answer

A) True 
 B)False

Question 7

The entry necessary to establish a petty cash fund should include:

Accepted Answer

A)  A debit to Cash and a credit to Petty Cash. 
B)  A debit to Cash and a credit to Cash Over and Short. 
C)  A debit to Petty Cash and a credit to Cash. 
D)  A debit to Petty Cash and a credit to Accounts Receivable. 
E)  A debit to Cash and a credit to Petty Cash Over and Short. 
A)  A debit to Cash and a credit to Petty Cash. 
B)  A debit to Cash and a credit to Cash Over and Short. 
C)  A debit to Petty Cash and a credit to Cash. 
D)  A debit to Petty Cash and a credit to Accounts Receivable. 
E)  A debit to Cash and a credit to Petty Cash Over and Short.

Question 8

When evaluating the days' sales uncollected ratio, generally the less time that money is tied up in receivables the better.

Accepted Answer

A) True 
 B)False

Question 9

Prenumbered printed checks are an example of which internal control principle?

Accepted Answer

A)  Technological controls. 
B)  Maintain adequate records. 
C)  Perform regular and independent reviews. 
D)  Establish responsibilities. 
E)  Divide responsibility for related transactions. 
A)  Technological controls. 
B)  Maintain adequate records. 
C)  Perform regular and independent reviews. 
D)  Establish responsibilities. 
E)  Divide responsibility for related transactions.

Question 10

The following information is available to reconcile Cloy Company's book balance of cash with its bank statement cash balance as of June 30. The June 30 cash balance according to the accounting records is $58,542, and the bank statement cash balance for that date is $68,047.
a. The bank erroneously cleared a $395 check against the account in June that was not issued by Cloy. The check documentation included with the bank statement indicates the check was actually issued by Clare Co.
b. On June 30, the bank issued a credit memorandum for $35 interest earned on Cloy's account.
c. When the June checks are compared with entries in the accounting records, it is found that Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was erroneously entered in the accounting records as $1,540.
d. A credit memorandum indicates that the bank collected $9,000 cash on a note receivable for Cloy, deducted a $30 collection fee, and credited the balance to the company's Cash account. Cloy did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.
f. Cloy's June 30 daily cash receipts of $6,325 were placed in the bank's night depository on that date, but do not appear on the June 30 bank statement.
g. Cloy's June 30 cash disbursements journal indicates that Check No. 1737 for $4,830 and Check No. 1740 for $3,280 were both written and entered in the accounting records, but are not among the canceled checks.
h. A debit memorandum for $85.00 indicates the bank deducted the annual lock box fee for the company.
1. Prepare the bank reconciliation for this company as of June 30.
2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of June 30.

Accepted Answer

The answer of The following information is available to reconcile...

Question 11

Define an internal control system and describe its purpose.

Accepted Answer

An internal control system refers to the

Question 12

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of _______________________.

Accepted Answer

Perform re

Question 13

What are the steps that must be completed before an invoice approval is complete and a voucher prepared?

Accepted Answer

There are four steps that must be comple

Question 14

All disbursements from petty cash should be documented by a petty cash receipt.

Accepted Answer

A) True 
 B)False

Question 15

The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

Accepted Answer

Encourage collection of receivables (off

Question 16

The number of days' sales uncollected is calculated by:

Accepted Answer

A)  Dividing accounts receivable by net sales. 
B)  Dividing accounts receivable by net sales and multiplying by 365. 
C)  Dividing net sales by accounts receivable. 
D)  Dividing net sales by accounts receivable and multiplying by 365. 
E)  Multiplying net sales by accounts receivable and dividing by 365. 
A)  Dividing accounts receivable by net sales. 
B)  Dividing accounts receivable by net sales and multiplying by 365. 
C)  Dividing net sales by accounts receivable. 
D)  Dividing net sales by accounts receivable and multiplying by 365. 
E)  Multiplying net sales by accounts receivable and dividing by 365.

Question 17

The principles of internal control include: establish responsibilities, maintain adequate records, insure assets, separate recordkeeping from custody of assets, and perform regular and independent reviews.

Accepted Answer

A) True 
 B)False

Question 18

Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  The depositor authorizes the bank to charge the depositor's account $50 for new checks. 
B)  The bank collects a note receivable and related interest on the depositor's behalf. 
C)  The depositor determines there are outstanding checks drawn on the account at month-end. 
D)  The depositor determines there are deposits in transit on the account at month-end. 
E)  The bank determines it incorrectly charged the depositor's account twice for the monthly service charge in a previous month. 
A)  The depositor authorizes the bank to charge the depositor's account $50 for new checks. 
B)  The bank collects a note receivable and related interest on the depositor's behalf. 
C)  The depositor determines there are outstanding checks drawn on the account at month-end. 
D)  The depositor determines there are deposits in transit on the account at month-end. 
E)  The bank determines it incorrectly charged the depositor's account twice for the monthly service charge in a previous month.

Question 20

The following information is available for Johnson Manufacturing Company at June 30:   Based on this information, Johnson Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

Accepted Answer

A)  $15,062 
B)  $20,146 
C)  $20,072 
D)  $19,205 
E)  $19,462 
A)  $15,062 
B)  $20,146 
C)  $20,072 
D)  $19,205 
E)  $19,462

Exam 8: Cash and Internal Controls

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

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

A company records purchases using the net method. On February 1, they purchased merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1 journal entry to record this transaction would include a:

Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

The entry necessary to establish a petty cash fund should include:

When evaluating the days' sales uncollected ratio, generally the less time that money is tied up in receivables the better.

Prenumbered printed checks are an example of which internal control principle?

Define an internal control system and describe its purpose.

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of _______________________.

What are the steps that must be completed before an invoice approval is complete and a voucher prepared?

All disbursements from petty cash should be documented by a petty cash receipt.

The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

The number of days' sales uncollected is calculated by:

The principles of internal control include: establish responsibilities, maintain adequate records, insure assets, separate recordkeeping from custody of assets, and perform regular and independent reviews.

Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.

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

The following information is available for Johnson Manufacturing Company at June 30: Based on this information, Johnson Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

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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