Question 1

A bank reconciliation should be prepared

Accepted Answer

A)  whenever the bank refuses to lend the company money. 
B)  when an employee is suspected of fraud. 
C)  to explain any difference between the depositor's balance per books and the balance per bank. 
D)  by the person who is authorized to sign checks. 
A)  whenever the bank refuses to lend the company money. 
B)  when an employee is suspected of fraud. 
C)  to explain any difference between the depositor's balance per books and the balance per bank. 
D)  by the person who is authorized to sign checks.

Question 2

In preparing its August 31, 2014 bank reconciliation, Acme Corp. has the following information available.   At August 31, 2014, Acme's adjusted cash balance is

Accepted Answer

A)  $20,800. 
B)  $20,200. 
C)  $20,100. 
D)  $18,500. 
A)  $20,800. 
B)  $20,200. 
C)  $20,100. 
D)  $18,500.

Question 3

An application of good internal control over cash disbursements is

Accepted Answer

A)  following payment, the approved invoice should be stamped PAID. 
B)  blank checks should be stored in the treasurer's desk. 
C)  each check should be compared with the approved invoice after the check is issued. 
D)  check signers should record the cash disbursements. 
A)  following payment, the approved invoice should be stamped PAID. 
B)  blank checks should be stored in the treasurer's desk. 
C)  each check should be compared with the approved invoice after the check is issued. 
D)  check signers should record the cash disbursements.

Question 4

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Accepted Answer

A) True 
 B)False

Question 5

Deposits in transit

Accepted Answer

A)  have been recorded on the company's books but not yet by the bank. 
B)  have been recorded by the bank but not yet by the company. 
C)  have not been recorded by the bank or the company. 
D)  are checks from customers which have not yet been received by the company. 
A)  have been recorded on the company's books but not yet by the bank. 
B)  have been recorded by the bank but not yet by the company. 
C)  have not been recorded by the bank or the company. 
D)  are checks from customers which have not yet been received by the company.

Question 6

Identify which principle of internal control is being followed in each of the following cases.
1. Warehouse employees do not have access to the accounting records.
2. Prenumbered shipping documents are prepared for each shipment of goods.
3. The locked warehouse is accessible only by warehouse employees with keys.

Accepted Answer

1. Segregation of du

Question 7

If a check correctly written and paid by the bank for ¥4,710 is incorrectly recorded on the company's books for ¥4,170, the appropriate treatment on the bank reconciliation would be to

Accepted Answer

A)  add ¥540 to the book's balance. 
B)  subtract ¥540 from the book's balance. 
C)  deduct ¥540 from the bank's balance. 
D)  deduct ¥4,710 from the book's balance. 
A)  add ¥540 to the book's balance. 
B)  subtract ¥540 from the book's balance. 
C)  deduct ¥540 from the bank's balance. 
D)  deduct ¥4,710 from the book's balance.

Question 8

Control over cash disbursements is generally more effective when

Accepted Answer

A)  all bills are paid in cash. 
B)  disbursements are made by the accounts payable subsidiary clerk. 
C)  payments are made by check. 
D)  all purchases are made on credit. 
A)  all bills are paid in cash. 
B)  disbursements are made by the accounts payable subsidiary clerk. 
C)  payments are made by check. 
D)  all purchases are made on credit.

Question 9

Cash equivalents are currently reported as short-term investments on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Dillman Food Store developed the following information in recording its bank statement for the month of March.   -------------------------------------------
(1) Checks written in March but still outstanding $6,000.
(2) Checks written in February but still outstanding $2,800.
(3) Deposits of March 30 and 31 not yet recorded by bank $5,200.
(4) NSF check of customer returned by bank $1,200.
(5) Check No. 210 for $594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for $549.
(6) Bank service charge for March was $50.
(7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable subsidiary ledger for $824 when Check No. 318 was correctly prepared for $284. The check cleared the bank in March.
(8) The bank collected a note receivable for the company for $5,000 plus $150 interest revenue.
Instructions
Prepare a bank reconciliation at March 31.

Accepted Answer

The answer of Dillman Food Store developed the following information...

Question 12

Identify the internal control procedures applicable to cash receipts for Ferguson Company in each of the following cases.
1. All cashiers are bonded.
2. The treasurer compares the total cash receipts to the bank deposit daily.
3. The bookkeeper records cash receipts which are held by the treasurer.
4. Only the treasurer holds cash receipts.
5. Deposit slips are completed for each deposit.

Accepted Answer

1. Human resource controls
2.

Question 13

Gordon Company is unable to reconcile the bank balance at January 31. Gordon's reconciliation is as follows.   Instructions
(a) Prepare a correct bank reconciliation.
(b) Journalize the entries required by the reconciliation.

Accepted Answer

The answer of Gordon Company is unable to reconcile the...

Question 14

Proper control for over-the-counter cash receipts includes

Accepted Answer

A)  a cash register with totals visible to the customer. 
B)  using electronic cash registers with no tapes. 
C)  cash count sheets requiring only the supervisor's signature. 
D)  cash count sheets requiring only the cashier's signature. 
A)  a cash register with totals visible to the customer. 
B)  using electronic cash registers with no tapes. 
C)  cash count sheets requiring only the supervisor's signature. 
D)  cash count sheets requiring only the cashier's signature.

Question 15

If a petty cash fund is established in the amount of ₤250, and contains ₤145 in cash and ₤100 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to which of the following accounts?

Accepted Answer

A)  Petty Cash, ₤100. 
B)  Petty Cash, ₤105. 
C)  Cash, ₤100; Cash Over and Short, ₤5. 
D)  Cash, ₤105. 
A)  Petty Cash, ₤100. 
B)  Petty Cash, ₤105. 
C)  Cash, ₤100; Cash Over and Short, ₤5. 
D)  Cash, ₤105.

Question 16

Personnel who handle cash receipts should have the option of taking a vacation or not.

Accepted Answer

A) True 
 B)False

Question 17

A disbursement system that uses wire, telephone, computers, etc., to transfer cash from one location to another is referred to as ______________.

Accepted Answer

The answer of A disbursement system that uses wire, telephone,...

Question 18

Bertram Company assembled the following information in completing its May bank reconciliation: balance per bank ₤23,460 outstanding checks ₤5,325; deposits in transit ₤3,750; NSF check ₤2,040; bank service charge ₤75; cash balance per books ₤24,000. As a result of this reconciliation, Bertram will

Accepted Answer

A)  reduce its cash account by ₤75. 
B)  reduce its cash account by ₤2,115. 
C)  increase its cash account by ₤1,575. 
D)  increase its cash account by ₤540. 
A)  reduce its cash account by ₤75. 
B)  reduce its cash account by ₤2,115. 
C)  increase its cash account by ₤1,575. 
D)  increase its cash account by ₤540.

Question 19

Internal auditors

Accepted Answer

A)  are hired by accounting firms to audit business firms. 
B)  are employees of the taxing authority who evaluate the internal controls of companies filing tax returns. 
C)  evaluate the system of internal controls for the companies that employ them. 
D)  cannot evaluate the system of internal controls of the company that employs them because they are not independent. 
A)  are hired by accounting firms to audit business firms. 
B)  are employees of the taxing authority who evaluate the internal controls of companies filing tax returns. 
C)  evaluate the system of internal controls for the companies that employ them. 
D)  cannot evaluate the system of internal controls of the company that employs them because they are not independent.

Question 20

Listed below are seven errors or problems which might occur in the processing of cash transactions. Also shown is a list of internal control principles. Evaluate each possible error and cite a principle that is listed that would reduce the probability of the error occurring. If none of the principles given will correct the problem, write "None." If you think more than one principle is appropriate, list all principles that apply.
Possible Errors or Problems
1. An employee steals the cash collected from a customer for an account receivable and conceals this theft by issuing a credit memorandum indicating that the customer returned the merchandise.
2. A small fire destroys 3 days of cash receipts.
3. The official designated to sign checks is able to steal blank checks and issue them without fear of detection.
4. A salesclerk in serving customers often rings up a sale for less than the actual amount and then keeps the additional cash collected from the customer.
5. Three cashiers use one cash register drawer and the cash in the drawer is often short of the balance kept on hand.
6. Each cashier counts his own register drawer each day and verbally reports the results to the supervisor.
7. Cashiers with over 5 years' experience are not bonded.
Internal Control Principles
a. Establishment of responsibility
b. Segregation of duties
c. Physical controls
d. Documentation procedures
e. Independent internal verification

Accepted Answer

1. b 5. a

A bank reconciliation should be prepared

In preparing its August 31, 2014 bank reconciliation, Acme Corp. has the following information available. At August 31, 2014, Acme's adjusted cash balance is

An application of good internal control over cash disbursements is

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Deposits in transit

If a check correctly written and paid by the bank for ¥4,710 is incorrectly recorded on the company's books for ¥4,170, the appropriate treatment on the bank reconciliation would be to

Control over cash disbursements is generally more effective when

Cash equivalents are currently reported as short-term investments on the statement of financial position.

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

Gordon Company is unable to reconcile the bank balance at January 31. Gordon's reconciliation is as follows. Instructions (a) Prepare a correct bank reconciliation. (b) Journalize the entries required by the reconciliation.

Proper control for over-the-counter cash receipts includes

If a petty cash fund is established in the amount of ₤250, and contains ₤145 in cash and ₤100 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to which of the following accounts?

Personnel who handle cash receipts should have the option of taking a vacation or not.

A disbursement system that uses wire, telephone, computers, etc., to transfer cash from one location to another is referred to as ______________.

Internal auditors

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Accounting and Financial Reporting for Contingent Liabilities and Leases

Filters

Exam 7: Fraud, Internal Control, and Cash

A bank reconciliation should be prepared

In preparing its August 31, 2014 bank reconciliation, Acme Corp. has the following information available. At August 31, 2014, Acme's adjusted cash balance is

An application of good internal control over cash disbursements is

Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.

Deposits in transit

If a check correctly written and paid by the bank for ¥4,710 is incorrectly recorded on the company's books for ¥4,170, the appropriate treatment on the bank reconciliation would be to

Control over cash disbursements is generally more effective when

Cash equivalents are currently reported as short-term investments on the statement of financial position.

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

Gordon Company is unable to reconcile the bank balance at January 31. Gordon's reconciliation is as follows. Instructions (a) Prepare a correct bank reconciliation. (b) Journalize the entries required by the reconciliation.

Proper control for over-the-counter cash receipts includes

If a petty cash fund is established in the amount of ₤250, and contains ₤145 in cash and ₤100 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to which of the following accounts?

Personnel who handle cash receipts should have the option of taking a vacation or not.

A disbursement system that uses wire, telephone, computers, etc., to transfer cash from one location to another is referred to as ______________.

Internal auditors

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Accounting and Financial Reporting for Contingent Liabilities and Leases

Filters