Exam 7: Fraud, Internal Control, and Cash

A petty cash fund is generally established in order to

The information below relates to the Cash account in the ledger of Remington Company. Balance September 1-$25,720; Cash deposited-$96,000. Balance September 30-$26,100; Checks written-$95,620. The September bank statement shows a balance of $24,635 on September 30 and the following memoranda. Credits Debits Collection of $1,250 note plus interest $50 $1,300 NSF check: J. E. Hoover $635 Interest earned on checking account $65 Safety deposit box rent $75 At September 30, deposits in transit were $6,695, and outstanding checks totaled $4,575. Instructions Prepare the bank reconciliation at September 30.

The cash account shows a balance of $55,000 before reconciliation. The bank statement does not include a deposit of $2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $79 was recorded as $97. The correct balance in the cash account was

The responsibility for keeping the records for an asset should be separate from the physical custody of that asset.

Savings accounts are usually classified as cash on the statement of financial position.

Cash register overages are deposited in the petty cash fund and cash shortages are made-up from the petty cash fund.

Fairly Company gathered the following reconciling information in preparing its April bank reconciliation: The adjusted cash balance per books on April 30 is

Riley Company received a notice with its bank statement that the bank had collected a note receivable for ₤8,000 plus ₤400 of interest. The bank had credited these amounts to Riley's account less a collection fee of ₤10. Riley Company had already accrued the interest for this note on its books. (a) How will these items affect Riley Company's bank reconciliation? (b) Prepare the journal entry that Riley Company will make to record this information on its books.

Allowing only designated personnel to handle cash receipts is an example of

Replenishing the petty cash fund requires

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

Electronic Funds Transfer (EFT) is a disbursement system that uses telephone or computer to transfer cash from one location to another.

The following information was used to prepare the March 2014, bank reconciliation for Grider Machine Works. Identify the items that require adjustment to the cash balance per books and prepare the appropriate adjusting entries. 1. Included with the bank statement materials was a check from Bob Simpson for $50 stamped "NSF." 2. A personal deposit by Jim Grider to his personal account in the amount of $300 for dividends on his General Electric ordinary shares was credited to the company account. 3. The bank statement included a debit memorandum for $27 for two books of blank checks for Grider Machine Works. 4. The bank statement contains a credit memorandum for $15 interest on the average checking account balance. 5. The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively, were not included in the bank statement postings. 6. Two checks totaling $316, which were outstanding at the end of February, cleared in March and were returned with the March statement. 7. The bank statement included a credit memorandum dated March 28, 2014, for $30 for the monthly interest on a 6-month, $15,000 certificate of deposit that the company owns. 8. Four checks, #8712, #8716, #8718, #8719, totaling $5,369, did not clear the bank during March. 9. On March 24, 2014, Grider Machine Works delivered to the bank for collection a $5,000, 3-month note from Don Decker. A credit memorandum dated March 29, 2014, indicated the collection of the note and $100 of interest. 10. The bank statement included a debit memorandum for $20 for the collection service on the above note and interest.

Cash registers are an important internal control device used in controlling over-the-counter receipts.

Each of the following items affect the cash balance per books except

When two or more people get together for the purpose of circumventing prescribed controls, it is called

Tyler, Inc. had the following bank reconciliation at March 31, 2014: All reconciling items at March 31, 2014 cleared the bank in April. Outstanding checks at April 30, 2014 totaled €6,000. There were no deposits in transit at April 30, 2014. What is the cash balance per books at April 30, 2014?

Laymon Boat Company's bank statement for the month of September showed a balance per bank of €7,000. The company's Cash account in the general ledger had a balance of €4,667 at September 30. Other information is as follows: (1) Cash receipts for September 30 recorded on the company's books were €5,000 but this amount does not appear on the bank statement. (2) The bank statement shows a debit memorandum for €60 for check printing charges. (3) Check No. 119 payable to Mann Company was recorded in the cash payments journal and cleared the bank for €248. A review of the accounts payable subsidiary ledger shows a €36 credit balance in the account of Mann Company and that the payment to them should have been for €284. (4) The total amount of checks still outstanding at September 30 amounted to €5,800. (5) Check No. 138 was correctly written and paid by the bank for €429. The cash payment journal reflects an entry for Check No. 138 as a debit to Accounts Payable and a credit to Cash in Bank for €492. (6) The bank returned an NSF check from a customer for €530. (7) The bank included a credit memorandum for €2,060 which represents collection of a customer's note by the bank for the company; principal amount of the note was €2,000 and interest was €60. Interest has not been accrued. Instructions (a) Prepare a bank reconciliation for Laymon Boat Company at September 30. (b) Prepare any adjusting entries necessary as a result of the bank reconciliation.

The preparation of a bank reconciliation is an important cash control procedure. If a company deposits cash receipts daily and makes all cash disbursements by check, explain why the cash balance per books might not agree with the cash balance shown on the bank statement. Identify specific examples that may cause differences between the cash balance per books and the cash balance per bank.