Question 1

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

Accepted Answer

A) added to the balance per books. 
B) deducted from the balance per books. 
C) added to the balance per bank. 
D) deducted from the balance per bank. 
A) added to the balance per books. 
B) deducted from the balance per books. 
C) added to the balance per bank. 
D) deducted from the balance per bank.

Question 2

Which of the following is not a suggested procedure to establish internal control over cash disbursements?

Accepted Answer

A) Anyone can sign the checks. 
B) Different individuals approve and make the payments. 
C) Blank checks are stored with limited access. 
D) The bank statement is reconciled monthly. 
A) Anyone can sign the checks. 
B) Different individuals approve and make the payments. 
C) Blank checks are stored with limited access. 
D) The bank statement is reconciled monthly.

Question 3

Dekin Company had checks outstanding totaling $34,000 on its May bank reconciliation. In June, Dekin Company issued checks totaling $212,800. The June bank statement shows that $158,400 in checks cleared the bank in June. A check from one of Dekin Company's customers in the amount of $1,600 was also returned marked "NSF." The amount of outstanding checks on Dekin Company's June bank reconciliation should be

Accepted Answer

A) $86,800. 
B) $54,400. 
C) $88,400. 
D) $20,400. 
A) $86,800. 
B) $54,400. 
C) $88,400. 
D) $20,400.

Question 4

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a basic principle of cash management?

Accepted Answer

A) Increase collection of receivables. 
B) Keep inventory levels low. 
C) Pay all liabilities early. 
D) Invest idle cash. 
A) Increase collection of receivables. 
B) Keep inventory levels low. 
C) Pay all liabilities early. 
D) Invest idle cash.

Question 6

It is unlikely that a company would want to bond its employees who handle cash or inventory.

Accepted Answer

A) True 
 B)False

Question 7

Employees sometimes commit fraud because of personal financial problems caused by too much debt.

Accepted Answer

A) True 
 B)False

Question 8

The following information was taken from Niland Company cash budget for the month of April $\begin{array}{lr}
\text { Beginning cash balance } & \$ 120,000 \
\text { Cash receipts } & 108,000 \
\text { Cash disbursements } & 136,000
\end{array}$ If the company has a policy of maintaining an end of the month cash balance of $100,000, the amount the company would have to borrow is

Accepted Answer

A) $116,000. 
B) $28,000. 
C) $8,000. 
D) $0. 
A) $116,000. 
B) $28,000. 
C) $8,000. 
D) $0.

Question 9

If employees are bonded

Accepted Answer

A) it means that they are not allowed to handle cash. 
B) they have worked for the company for at least 10 years. 
C) they have been insured against misappropriation of assets. 
D) it is impossible for them to steal from the company. 
A) it means that they are not allowed to handle cash. 
B) they have worked for the company for at least 10 years. 
C) they have been insured against misappropriation of assets. 
D) it is impossible for them to steal from the company.

Question 10

An effective system of internal control requires that at least two individuals be assigned to one cash drawer so that each can serve as check on the other.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of a bank reconciliation item that requires an adjusting entry?

Accepted Answer

A) NSF check. 
B) Deposit in transit. 
C) Bank error. 
D) None of these items requires an adjusting entry. 
A) NSF check. 
B) Deposit in transit. 
C) Bank error. 
D) None of these items requires an adjusting entry.

Question 12

At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts?

Accepted Answer

A) Physical controls. 
B) Documentation procedures. 
C) Segregation of duties. 
D) Mechanical controls. 
A) Physical controls. 
B) Documentation procedures. 
C) Segregation of duties. 
D) Mechanical controls.

Question 13

A bank statement

Accepted Answer

A) lets a depositor know the financial position of the bank as of a certain date. 
B) is a credit reference letter written by the depositor's bank. 
C) is a bill from the bank for services rendered. 
D) shows the activities that increased or decreased the depositor's account balance. 
A) lets a depositor know the financial position of the bank as of a certain date. 
B) is a credit reference letter written by the depositor's bank. 
C) is a bill from the bank for services rendered. 
D) shows the activities that increased or decreased the depositor's account balance.

Question 14

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a basic principle of cash management?

Accepted Answer

A) Increase the speed of collection on receivables. 
B) Maintain idle cash. 
C) Keep inventory levels low. 
D) Delay payment of liabilities. 
A) Increase the speed of collection on receivables. 
B) Maintain idle cash. 
C) Keep inventory levels low. 
D) Delay payment of liabilities.

Question 16

Mrs. Smith has worked for Bosco Inc. for 20 years without taking a vacation. An internal control feature that would address this situation would be

Accepted Answer

A) human resource controls. 
B) establishment of responsibility. 
C) physical controls. 
D) documentation procedures. 
A) human resource controls. 
B) establishment of responsibility. 
C) physical controls. 
D) documentation procedures.

Question 17

If a check correctly written and paid by the bank for $628 is incorrectly recorded on the company's books for $682, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A) add $54 to the book's balance. 
B) subtract $54 from the book's balance. 
C) deduct $54 from the bank's balance. 
D) deduct $628 from the book's balance. 
A) add $54 to the book's balance. 
B) subtract $54 from the book's balance. 
C) deduct $54 from the bank's balance. 
D) deduct $628 from the book's balance.

Question 18

Which one of the following is not an objective of a system of internal controls?

Accepted Answer

A) Safeguard company assets. 
B) Overstate liabilities in order to be conservative. 
C) Enhance the accuracy and reliability of accounting records. 
D) Reduce the risks of errors. 
A) Safeguard company assets. 
B) Overstate liabilities in order to be conservative. 
C) Enhance the accuracy and reliability of accounting records. 
D) Reduce the risks of errors.

Question 19

Internal control measures

Accepted Answer

A) only apply to publicly traded companies. 
B) are in place to safeguard assets. 
C) can eliminate all irregularities in the accounting process. 
D) All of these answer choices are correct. 
A) only apply to publicly traded companies. 
B) are in place to safeguard assets. 
C) can eliminate all irregularities in the accounting process. 
D) All of these answer choices are correct.

Question 20

Which of the following is not one of the main factors that contribute to fraudulent activity?

Accepted Answer

A) Opportunity. 
B) Incompatible duties. 
C) Financial pressure. 
D) Rationalization. 
A) Opportunity. 
B) Incompatible duties. 
C) Financial pressure. 
D) Rationalization.

Exam 6: Fraud, Internal Control, and Cash

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

Which of the following is not a suggested procedure to establish internal control over cash disbursements?

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

Which of the following is not a basic principle of cash management?

It is unlikely that a company would want to bond its employees who handle cash or inventory.

Employees sometimes commit fraud because of personal financial problems caused by too much debt.

If employees are bonded

An effective system of internal control requires that at least two individuals be assigned to one cash drawer so that each can serve as check on the other.

Which of the following is an example of a bank reconciliation item that requires an adjusting entry?

At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts?

A bank statement

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash.

Which of the following is not a basic principle of cash management?

Mrs. Smith has worked for Bosco Inc. for 20 years without taking a vacation. An internal control feature that would address this situation would be

If a check correctly written and paid by the bank for $628 is incorrectly recorded on the company's books for $682, the appropriate treatment on the bank reconciliation would be to

Which one of the following is not an objective of a system of internal controls?

Internal control measures

Which of the following is not one of the main factors that contribute to fraudulent activity?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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