Question 1

____________ are short-term, highly liquid investment assets that are readily convertible to a known amount of cash.

Accepted Answer

The answer of ____________ are short-term, highly liquid investment assets...

Question 2

Reasons that internal controls are crucial to companies that convert from U.S. GAAP to IFRS include all of the following except:

Accepted Answer

A)  Possible misstatement of financial information. 
B)  Possible fraud. 
C)  Controls are significantly different across the globe. 
D)  Ineffective communication of the change to investors, creditors, and others. 
E)  Management's inability to certify the effectiveness of the controls. 
A)  Possible misstatement of financial information. 
B)  Possible fraud. 
C)  Controls are significantly different across the globe. 
D)  Ineffective communication of the change to investors, creditors, and others. 
E)  Management's inability to certify the effectiveness of the controls.

Question 3

Cancelled checks are checks the bank has paid and deducted from the customer's account during the period.

Accepted Answer

A) True 
 B)False

Question 4

A sales system with prenumbered, controlled sales slips is an example of the internal control principle of ______________________.

Accepted Answer

Maintain a

Question 5

The following information is available to reconcile Litner Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $78,356, and the bank statement cash balance for that date is $83,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Litner. The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Litner's account.
c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350.
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner, deducted a $30 collection fee, and credited the balance to the company's Cash account. Litner 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. Litner's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.
g. Litner's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.
1. Prepare the bank reconciliation for this company as of April 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 April 30.

Accepted Answer

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

Question 6

If the Cash Over and Short account has a debit balance at the end of the period, the amount is reported as miscellaneous revenue.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Internal control policies and procedures have limitations including:

Accepted Answer

A)  Human error. 
B)  Human fraud. 
C)  Cost-benefit principle. 
D)  Collusion. 
E)  All of these. 
A)  Human error. 
B)  Human fraud. 
C)  Cost-benefit principle. 
D)  Collusion. 
E)  All of these.

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

An expense resulting from failing to take advantage of cash discounts on purchases is called:

Accepted Answer

A)  Sales discounts. 
B)  Trade discounts. 
C)  Purchases discounts. 
D)  Discounts lost. 
E)  Discounts earned. 
A)  Sales discounts. 
B)  Trade discounts. 
C)  Purchases discounts. 
D)  Discounts lost. 
E)  Discounts earned.

Question 11

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control and safeguarding of cash.

Accepted Answer

A) True 
 B)False

Question 12

Preparing a bank reconciliation on a monthly basis is an example of:

Accepted Answer

A)  Establishing responsibility. 
B)  Separation of duties. 
C)  Protecting assets by proving accuracy of cash records. 
D)  A technological control. 
E)  Poor internal control. 
A)  Establishing responsibility. 
B)  Separation of duties. 
C)  Protecting assets by proving accuracy of cash records. 
D)  A technological control. 
E)  Poor internal control.

Question 13

Outstanding checks refer to checks that have been:

Accepted Answer

A)  Written, recorded, sent to payees, and received and paid by the bank. 
B)  Written and not yet recorded in the company books. 
C)  Held as blank checks. 
D)  Written, recorded on the company books, sent to the payee, but have not yet been paid by the bank. 
E)  Issued by the bank. 
A)  Written, recorded, sent to payees, and received and paid by the bank. 
B)  Written and not yet recorded in the company books. 
C)  Held as blank checks. 
D)  Written, recorded on the company books, sent to the payee, but have not yet been paid by the bank. 
E)  Issued by the bank.

Question 14

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 15

Match each of the following terms with the appropriate definitions.

Accepted Answer

The answer of Match each of the following terms with...

Question 16

The Discounts Lost account represents the savings earned in taking advantage of purchase discounts.

Accepted Answer

A) True 
 B)False

Question 17

The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment 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 18

During the month of September, Norris Industries issued a check in the amount of $845 to a supplier on account. The check cleared the bank during September. The disbursement was recorded incorrectly as $854. The journal entry to correct this mistake when discovered will include:

Accepted Answer

A)  A debit to Accounts Payable for $854. 
B)  A credit to Cash for $854. 
C)  A credit to Cash for $9. 
D)  A credit to Accounts Payable for $9. 
E)  A debit to Cash for $49. 
A)  A debit to Accounts Payable for $854. 
B)  A credit to Cash for $854. 
C)  A credit to Cash for $9. 
D)  A credit to Accounts Payable for $9. 
E)  A debit to Cash for $49.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Cash and Internal Controls

____________ are short-term, highly liquid investment assets that are readily convertible to a known amount of cash.

Reasons that internal controls are crucial to companies that convert from U.S. GAAP to IFRS include all of the following except:

Cancelled checks are checks the bank has paid and deducted from the customer's account during the period.

A sales system with prenumbered, controlled sales slips is an example of the internal control principle of ______________________.

If the Cash Over and Short account has a debit balance at the end of the period, the amount is reported as miscellaneous revenue.

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 _______________________.

Internal control policies and procedures have limitations including:

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.

An expense resulting from failing to take advantage of cash discounts on purchases is called:

Basic bank services such as bank accounts, bank deposits, and checking contribute to the control and safeguarding of cash.

Preparing a bank reconciliation on a monthly basis is an example of:

Outstanding checks refer to checks that have been:

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):

Match each of the following terms with the appropriate definitions.

The Discounts Lost account represents the savings earned in taking advantage of purchase discounts.

The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment is the

During the month of September, Norris Industries issued a check in the amount of $845 to a supplier on account. The check cleared the bank during September. The disbursement was recorded incorrectly as $854. The journal entry to correct this mistake when discovered will include:

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

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

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

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