Exam 8: Cash and Internal Controls

The following information is available for Holland Company at December 31: Based on this information, Holland Company should report Cash and Cash Equivalents on December 31 of:

Explain the difference between cash and cash equivalents.

The following information is available for the Edwards Company for its March 31 bank reconciliation: From the March 31 bank statement:

The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

Internal control procedures for cash receipts require that:

________________________ are checks written (or drawn) by the depositor, deducted on the depositor's records, and sent to the payee, but not yet recorded by the bank for payment at the bank statement date.

A company established a $400 petty cash fund by issuing a check to the custodian on October 1. On October 15, the petty cash fund was replenished and increased to $1,000 in total. The contents of the petty cash fund at the time of the October 15 replenishment were: Prepare the general journal entry to record both the reimbursement and the increase of the petty fund on October 15.

Factors that cause the bank statement balance for a checking account to be different from the company's checking account balance include: outstanding checks, deposits in transit, deductions for bank fees, additions for interest, and errors.

On a bank statement, deposits are listed as debits because the bank increases its cash account when the deposit is made.

The days' sales uncollected ratio is used to:

What is the purpose of the days' sales uncollected ratio?

Basic bank services include:

For which item does a bank NOT issue a debit memorandum?

A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.

A bank statement includes:

The Sarbanes-Oxley Act (SOX) requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are some of the specific requirements?

On November 1, a company established a $90 petty cash fund. On November 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $34.50; and office supplies, $36. Give the entry to reimburse the fund and to increase its amount to $150 on November 12.

Technologically advanced accounting systems do not need monitoring for errors because computers always process transactions correctly.

Maintaining adequate records is an important internal control principle.

Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include: