Question 1

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 2

An internal control system refers to the policies and procedures managers use to _________, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

Accepted Answer

The answer of An internal control system refers to the...

Question 3

On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

Accepted Answer

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

Question 4

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 5

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 _______________________.

Accepted Answer

Separate r

Question 6

The internal document that is used to notify the appropriate person that ordered goods have been received and to describe the quantities and condition of the goods is the ___________________.

Accepted Answer

The answer of The internal document that is used to...

Question 7

Separation of duties divides responsibility for a transaction or a series of related transactions between two or more individuals or departments. Separation of duties reduces the risk of error and fraud.

Accepted Answer

A) True 
 B)False

Question 8

A company established a petty cash fund of $100 on September 1. On September 10, the petty cash fund was replenished when there was $16 remaining and there were petty cash receipts for: office supplies, $27; transportation-in on inventory purchased, $32; and postage, $22. On September 15, the petty cash fund was increased to $125 in total. Record the above transactions in general journal form.

Accepted Answer

The answer of A company established a petty cash fund...

Question 9

An invoice is a document that is used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

Accepted Answer

A) True 
 B)False

Question 10

If a check correctly written and paid by the bank for $794 is incorrectly recorded in the company's books for $749, how should this error be treated on the bank reconciliation?

Accepted Answer

A)  Subtract $45 from the bank's balance. 
B)  Add $45 to the bank's balance. 
C)  Subtract $45 from the book balance. 
D)  Add $45 to the book balance. 
E)  Subtract $45 from the bank's balance and add $45 to the book's balance. 
A)  Subtract $45 from the bank's balance. 
B)  Add $45 to the bank's balance. 
C)  Subtract $45 from the book balance. 
D)  Add $45 to the book balance. 
E)  Subtract $45 from the bank's balance and add $45 to the book's balance.

Question 11

On August 25, a company purchased $5,000 worth of merchandise on terms 2/10, n/30; on September 4, the amount due was paid. Using the net method of recording purchases, prepare general journal entries to record (a) the purchase on August 25, and (b) the cash payment on September 4.

Accepted Answer

The answer of On August 25, a company purchased $5,000...

Question 12

A check involves 3 parties: the maker who signs the check, the payee who is the recipient, and the bank on which the check is drawn.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A company using the net method of recording purchases failed to take advantage of a discount available. When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to:

Accepted Answer

A)  Merchandise Inventory. 
B)  Sales Discounts. 
C)  Discounts Lost. 
D)  Cash. 
E)  Accounts Receivable. 
A)  Merchandise Inventory. 
B)  Sales Discounts. 
C)  Discounts Lost. 
D)  Cash. 
E)  Accounts Receivable.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Describe the net method of accounting for purchases. Why do companies use the net method?

Accepted Answer

The net method assumes that a firm will

Question 18

Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Exam 8: Cash and Internal Controls

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

An internal control system refers to the policies and procedures managers use to _________, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

Cash equivalents:

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 _______________________.

The internal document that is used to notify the appropriate person that ordered goods have been received and to describe the quantities and condition of the goods is the ___________________.

Separation of duties divides responsibility for a transaction or a series of related transactions between two or more individuals or departments. Separation of duties reduces the risk of error and fraud.

An invoice is a document that is used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

If a check correctly written and paid by the bank for $794 is incorrectly recorded in the company's books for $749, how should this error be treated on the bank reconciliation?

On August 25, a company purchased $5,000 worth of merchandise on terms 2/10, n/30; on September 4, the amount due was paid. Using the net method of recording purchases, prepare general journal entries to record (a) the purchase on August 25, and (b) the cash payment on September 4.

A check involves 3 parties: the maker who signs the check, the payee who is the recipient, and the bank on which the check is drawn.

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.

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

A company using the net method of recording purchases failed to take advantage of a discount available. When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to:

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

Describe the net method of accounting for purchases. Why do companies use the net method?

Cash equivalents are short-term highly liquid investment assets that are readily converted to a known cash amount, and have maturities of one year.

The number of days' sales uncollected is calculated by:

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

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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