Question 1

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 2

In a voucher system vouchers are prepared in the accounts receivable department.

Accepted Answer

A) True 
 B)False

Question 3

For efficiency of operations and better control over cash a company should maintain only one bank account.

Accepted Answer

A) True 
 B)False

Question 4

Cash consists of each of the following except

Accepted Answer

A)  checks. 
B)  money orders. 
C)  restricted cash. 
D)  All of these choices are considered cash. 
A)  checks. 
B)  money orders. 
C)  restricted cash. 
D)  All of these choices are considered cash.

Question 5

A company stamps checks received in the mail with the words "For Deposit Only". This endorsement is called a(n)

Accepted Answer

A)  blank endorsement. 
B)  rubber stamp. 
C)  restrictive endorsement. 
D)  operational endorsement. 
A)  blank endorsement. 
B)  rubber stamp. 
C)  restrictive endorsement. 
D)  operational endorsement.

Question 6

Physical controls to safeguard assets do not include

Accepted Answer

A)  cashier department supervisors. 
B)  vaults. 
C)  employee identification badges. 
D)  security guards. 
A)  cashier department supervisors. 
B)  vaults. 
C)  employee identification badges. 
D)  security guards.

Question 7

A debit memorandum could show the collection of a note receivable by the bank.

Accepted Answer

A) True 
 B)False

Question 8

In preparing a bank reconciliation outstanding checks are

Accepted Answer

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

Question 9

Match between columns
                        Premises: Segregation of duties.
One to whom a check is payable.
Two or more employees circumventing prescribed procedures.
Prevent a transaction from being  recorded more than once.
Checks which have been returned by the maker's bank  for lack of funds.
Checks which have been paid by the depositor's bank.
Indicates those people authorized to sign checks.
Anything that a bank will accept for deposit.
Mechanical and electronic control devices.
One who issues a check.
Insurance protection against misappropriation of assets.
An extensive network of approvals by authorized individuals.
Document indicating the purpose of a petty cash expenditure.
Issued checks that have not been paid by the bank.
Highly liquid investments.

Accepted Answer

The Answer of Prenumbered documents and Custody of an asset is...

Question 10

Identify the internal control procedures applicable to cash disbursements followed by Downey Company in each of the following cases.
1. Company checks are prenumbered.
2. Only the treasurer is authorized to sign checks.
3. All employees are required to take vacations.
4. Blank checks are stored in a locked safe.
5. The bookkeeper not the treasurer records cash disbursements.

Accepted Answer

1. Documentation procedures
2.

Question 11

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 12

To obtain maximum benefit from a bank reconciliation the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.

Accepted Answer

A) True 
 B)False

Question 13

Match between columns
                        Premises: The same person opens incoming mail and posts the accounts receivable subsidiary ledger.
Three people handle cash sales from the same cash register drawer.
A clothing store is experiencing a high level of inventory shortages because people try on clothing and walk out of the store without paying for the merchandise.
The person who is authorized to sign checks approves purchase orders for payment.
Some cash payments are not recorded because checks are not prenumbered.
Cash shortages are not discovered because there are no daily cash counts by supervisors.
The treasurer of the company has not taken a vacation for over 20 years.

Accepted Answer

The Answer of Establishment of responsibility and Segregation of duties is...

Question 14

A credit balance in Cash Over and Short is reported as a(n)

Accepted Answer

A)  asset. 
B)  liability. 
C)  miscellaneous expense. 
D)  miscellaneous revenue. 
A)  asset. 
B)  liability. 
C)  miscellaneous expense. 
D)  miscellaneous revenue.

Question 15

Cash equivalents are defined by IFRS as

Accepted Answer

A)  cash on hand. 
B)  demand deposits. 
C)  cash on hand and demand deposits. 
D)  short-term highly liquid investments that are readily convertible into known amounts of cash. 
A)  cash on hand. 
B)  demand deposits. 
C)  cash on hand and demand deposits. 
D)  short-term highly liquid investments that are readily convertible into known amounts of cash.

Question 16

Riley Company received a notice with its bank statement that the bank had collected a note receivable for $5000 plus $150 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.

Accepted Answer

(a) Riley Company must add the amount of

Question 17

The principle of internal control that prevents one individual from being responsible for all the related activities of a given task is ______________.

Accepted Answer

segregatio

Question 18

Bonding personnel who handle cash and conducting background checks

Accepted Answer

A)  automated controls. 
B)  external controls. 
C)  human resource controls. 
D)  physical controls. 
A)  automated controls. 
B)  external controls. 
C)  human resource controls. 
D)  physical controls.

Question 19

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

Accepted Answer

A)  bank service charges. 
B)  notes collected by the bank. 
C)  NSF checks. 
D)  outstanding checks. 
A)  bank service charges. 
B)  notes collected by the bank. 
C)  NSF checks. 
D)  outstanding checks.

Question 20

A $100 petty cash fund has cash of $9 and receipts of $85. The journal entry to replenish the account would include a credit to

Accepted Answer

A)  Cash for $91. 
B)  Petty Cash for $85. 
C)  Cash Over and Short for $6. 
D)  Cash for $85. 
A)  Cash for $91. 
B)  Petty Cash for $85. 
C)  Cash Over and Short for $6. 
D)  Cash for $85.

Exam 8: Fraud, Internal Control, and Cash

An application of good internal control over cash disbursements is

In a voucher system vouchers are prepared in the accounts receivable department.

For efficiency of operations and better control over cash a company should maintain only one bank account.

Cash consists of each of the following except

A company stamps checks received in the mail with the words "For Deposit Only". This endorsement is called a(n)

Physical controls to safeguard assets do not include

A debit memorandum could show the collection of a note receivable by the bank.

In preparing a bank reconciliation outstanding checks are

If employees are bonded

To obtain maximum benefit from a bank reconciliation the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash.

A credit balance in Cash Over and Short is reported as a(n)

Cash equivalents are defined by IFRS as

The principle of internal control that prevents one individual from being responsible for all the related activities of a given task is ______________.

Bonding personnel who handle cash and conducting background checks

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

A $100 petty cash fund has cash of $9 and receipts of $85. The journal entry to replenish the account would include a credit to

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

Filters