Question 1

Which the following is the primary cause for discrepancy between the bank statement and the company's general ledger cash account?

Accepted Answer

A)  Time lags that prevent one of the parties from recording a transaction in the same period as the other. 
B)  Fraudulent activity occurring with the cash account. 
C)  Unusual items would be the only cause since discrepancies rarely occur between the bank statement and the general ledger cash account. 
D)  The only reason for discrepancies would be errors made by either the company or the bank. 
A)  Time lags that prevent one of the parties from recording a transaction in the same period as the other. 
B)  Fraudulent activity occurring with the cash account. 
C)  Unusual items would be the only cause since discrepancies rarely occur between the bank statement and the general ledger cash account. 
D)  The only reason for discrepancies would be errors made by either the company or the bank.

Question 2

When one person is responsible for all related activities, the potential for errors and irregularities increases.

Accepted Answer

A) True 
 B)False

Question 3

International companies frequently list current assets in increasing order of liquidity.

Accepted Answer

A) True 
 B)False

Question 4

A petty cash fund is generally established in order to

Accepted Answer

A)  pay for all merchandise purchased on account. 
B)  pay employees' wages. 
C)  make loans internally to employees. 
D)  pay relatively small expenditures. 
A)  pay for all merchandise purchased on account. 
B)  pay employees' wages. 
C)  make loans internally to employees. 
D)  pay relatively small expenditures.

Question 5

All of the following parties are involved when bank credit cards are used to make a retail sale, EXCEPT

Accepted Answer

A)  the bank credit card company. 
B)  the retailer. 
C)  the customer's supplier. 
D)  the customer. 
A)  the bank credit card company. 
B)  the retailer. 
C)  the customer's supplier. 
D)  the customer.

Question 6

Two individuals at a retail store work the same cash register. You evaluate this situation as

Accepted Answer

A)  a violation of establishment of responsibility. 
B)  a violation of segregation of duties. 
C)  supporting the establishment of responsibility. 
D)  supporting independent checks of performance. 
A)  a violation of establishment of responsibility. 
B)  a violation of segregation of duties. 
C)  supporting the establishment of responsibility. 
D)  supporting independent checks of performance.

Question 7

A petty cash fund should be replenished

Accepted Answer

A)  every day. 
B)  at the end of every accounting period. 
C)  once a year. 
D)  as soon as an expense is paid from the fund. 
A)  every day. 
B)  at the end of every accounting period. 
C)  once a year. 
D)  as soon as an expense is paid from the fund.

Question 8

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

Accepted Answer

A)  documentation procedures are violated. 
B)  internal independent check of performance is violated. 
C)  segregation of duties is violated. 
D)  establishment of responsibility is violated. 
A)  documentation procedures are violated. 
B)  internal independent check of performance is violated. 
C)  segregation of duties is violated. 
D)  establishment of responsibility is violated.

Question 9

The retailer considers VISA and MasterCard sales as

Accepted Answer

A)  cash sales. 
B)  promissory sales. 
C)  credit sales. 
D)  contingent sales. 
A)  cash sales. 
B)  promissory sales. 
C)  credit sales. 
D)  contingent sales.

Question 10

The Sarbanes Oxley will have little impact on Canadian companies as it is legislation enacted in the United States.

Accepted Answer

A) True 
 B)False

Question 11

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 activity which 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 activity which increased or decreased the depositor's account balance.

Question 12

If there are outstanding company cheques listed on the bank reconciliation, it means that the balance in the bank account is less than the amount showing on the company's books.

Accepted Answer

A) True 
 B)False

Question 13

Using a bank increases the internal control over cash.

Accepted Answer

A) True 
 B)False

Question 14

Internal control over cash receipts will include all of the following EXCEPT

Accepted Answer

A)  only designated personnel are authorized to handle cash receipts. 
B)  only one authorized person will receive the cash and record the cash receipts. 
C)  use of cash registers. 
D)  employees are required to take vacation. 
A)  only designated personnel are authorized to handle cash receipts. 
B)  only one authorized person will receive the cash and record the cash receipts. 
C)  use of cash registers. 
D)  employees are required to take vacation.

Question 15

Documentation procedures do NOT include which of the following?

Accepted Answer

A)  pre-numbered documents 
B)  source documents sent promptly to the accounting department 
C)  all controls written down and kept updated 
D)  alarms set at the close of the business day 
A)  pre-numbered documents 
B)  source documents sent promptly to the accounting department 
C)  all controls written down and kept updated 
D)  alarms set at the close of the business day

Question 16

A petty cash fund of $100 is replenished when the fund contains $5 in cash and receipts for $93. The entry to replenish the fund would include a

Accepted Answer

A)  credit to Cash Over and Short for $2. 
B)  credit to Miscellaneous Revenue for $2. 
C)  debit to Cash Over and Short for $2. 
D)  debit to Miscellaneous Expense for $2. 
A)  credit to Cash Over and Short for $2. 
B)  credit to Miscellaneous Revenue for $2. 
C)  debit to Cash Over and Short for $2. 
D)  debit to Miscellaneous Expense for $2.

Question 17

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

Accepted Answer

A) True 
 B)False

Question 18

The daily cash count of cash register receipts made by department supervisors is an example of

Accepted Answer

A)  documentation procedures. 
B)  internal independent check of performance. 
C)  establishment of responsibility. 
D)  segregation of duties. 
A)  documentation procedures. 
B)  internal independent check of performance. 
C)  establishment of responsibility. 
D)  segregation of duties.

Question 19

Which of the following is NOT considered a control activity?

Accepted Answer

A)  reliable financial reporting 
B)  physical controls 
C)  independent checks of performance 
D)  segregation of duties 
A)  reliable financial reporting 
B)  physical controls 
C)  independent checks of performance 
D)  segregation of duties

Question 20

Proper segregation of accounting duties eliminates the need for internal controls.

Accepted Answer

A) True 
 B)False

Which the following is the primary cause for discrepancy between the bank statement and the company's general ledger cash account?

When one person is responsible for all related activities, the potential for errors and irregularities increases.

International companies frequently list current assets in increasing order of liquidity.

A petty cash fund is generally established in order to

All of the following parties are involved when bank credit cards are used to make a retail sale, EXCEPT

Two individuals at a retail store work the same cash register. You evaluate this situation as

A petty cash fund should be replenished

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

The retailer considers VISA and MasterCard sales as

The Sarbanes Oxley will have little impact on Canadian companies as it is legislation enacted in the United States.

A bank statement

If there are outstanding company cheques listed on the bank reconciliation, it means that the balance in the bank account is less than the amount showing on the company's books.

Using a bank increases the internal control over cash.

Internal control over cash receipts will include all of the following EXCEPT

Documentation procedures do NOT include which of the following?

A petty cash fund of $100 is replenished when the fund contains $5 in cash and receipts for $93. The entry to replenish the fund would include a

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

The daily cash count of cash register receipts made by department supervisors is an example of

Which of the following is NOT considered a control activity?

Proper segregation of accounting duties eliminates the need for internal controls.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Accounting for Receivables

Long-Lived Assets

Current Liabilities and Payroll

Filters

Exam 7: Internal Control and Cash

Which the following is the primary cause for discrepancy between the bank statement and the company's general ledger cash account?

When one person is responsible for all related activities, the potential for errors and irregularities increases.

International companies frequently list current assets in increasing order of liquidity.

A petty cash fund is generally established in order to

All of the following parties are involved when bank credit cards are used to make a retail sale, EXCEPT

Two individuals at a retail store work the same cash register. You evaluate this situation as

A petty cash fund should be replenished

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

The retailer considers VISA and MasterCard sales as

The Sarbanes Oxley will have little impact on Canadian companies as it is legislation enacted in the United States.

A bank statement

If there are outstanding company cheques listed on the bank reconciliation, it means that the balance in the bank account is less than the amount showing on the company's books.

Using a bank increases the internal control over cash.

Internal control over cash receipts will include all of the following EXCEPT

Documentation procedures do NOT include which of the following?

A petty cash fund of $100 is replenished when the fund contains $5 in cash and receipts for $93. The entry to replenish the fund would include a

The concept of reasonable assurance is based on the belief that the cost of control activities should NOT be more than their expected benefits.

The daily cash count of cash register receipts made by department supervisors is an example of

Which of the following is NOT considered a control activity?

Proper segregation of accounting duties eliminates the need for internal controls.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Inventory Costing

Accounting for Receivables

Long-Lived Assets

Current Liabilities and Payroll

Filters