Question 1

An exception to disbursements being made by check is acceptable when cash is paid

Accepted Answer

A)  to an owner. 
B)  to employees as wages. 
C)  from petty cash. 
D)  to employees as loans. 
A)  to an owner. 
B)  to employees as wages. 
C)  from petty cash. 
D)  to employees as loans.

Question 2

A debit balance in Cash Over and Short is reported as a

Accepted Answer

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

Question 3

An example of poor internal control is

Accepted Answer

A)  The accountant should not have physical custody of the asset nor access to it. 
B)  The custodian of an asset should not maintain or have access to the accounting records. 
C)  One person should be responsible for handling related transactions. 
D)  A salesperson makes the sale, and a different person ships the goods. 
A)  The accountant should not have physical custody of the asset nor access to it. 
B)  The custodian of an asset should not maintain or have access to the accounting records. 
C)  One person should be responsible for handling related transactions. 
D)  A salesperson makes the sale, and a different person ships the goods.

Question 4

All of the following would involve a debit memorandum except

Accepted Answer

A)  a bank service charge. 
B)  an NSF check. 
C)  the cost of printing checks. 
D)  interest earned. 
A)  a bank service charge. 
B)  an NSF check. 
C)  the cost of printing checks. 
D)  interest earned.

Question 5

For accounting purposes, postdated checks (checks payable in the future) are considered to be

Accepted Answer

A)  money orders. 
B)  cash. 
C)  petty cash. 
D)  accounts receivable. 
A)  money orders. 
B)  cash. 
C)  petty cash. 
D)  accounts receivable.

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

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

Accepted Answer

A)  Accounts Receivable Cash 
B)  Cash Accounts Receivable 
C)  Miscellaneous Expense Accounts Receivable 
D)  No adjusting entry is necessary. 
A)  Accounts Receivable Cash 
B)  Cash Accounts Receivable 
C)  Miscellaneous Expense Accounts Receivable 
D)  No adjusting entry is necessary.

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Epley Company needs to make adjusting entries for each of the following reconciling items. Identify the account to be debited and the account to be credited in each case.
1. A check for $59 written to the company by J. Neutron was returned NSF.
2. The monthly service charge by the bank was $34.
3. The bank collected a $1,000 note plus interest of $97 on the company's behalf. The company had not accrued the interest.

Accepted Answer

1. Debit: Accounts Receivable

Question 11

An employee authorized to sign checks should not record

Accepted Answer

A)  owner cash contributions. 
B)  mail receipts. 
C)  cash disbursement transactions. 
D)  sales transactions. 
A)  owner cash contributions. 
B)  mail receipts. 
C)  cash disbursement transactions. 
D)  sales transactions.

Question 12

A debit memorandum issued by the bank ______________ the cash balance in the depositor's account.

Accepted Answer

The answer of A debit memorandum issued by the bank...

Question 13

A highly automated computerized system of accounting eliminates the need for internal control.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following would not be reported on the balance sheet as a cash equivalent?

Accepted Answer

A)  Money market fund 
B)  Sixty-day certificate of deposit 
C)  Six-month Treasury bill 
D)  Money market savings certificate 
A)  Money market fund 
B)  Sixty-day certificate of deposit 
C)  Six-month Treasury bill 
D)  Money market savings certificate

Question 16

Management is responsible for establishing a system of internal control.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Riley Company received a notice with its bank statement that the bank had collected a note receivable for $6,000 plus $300 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

Question 19

Establishment of responsibility
B. Segregation of duties
C. Documentation procedures
D. Physical controls
E. Independent internal verification
F. Human resource controls
_____ 1. Involves the review, comparison, and reconciliation of data prepared by other employees.
_____ 2. Provide evidence that transactions and events have occurred.
_____ 3. Includes the authorization and approval of transactions.
_____ 4. Rotating employees' duties and requiring employees to take vacations.
_____ 5. Related activities should be assigned to different individuals.
_____ 6. Using garment sensors to deter theft.

Accepted Answer

1. E 3. A

Question 20

Internal controls are concerned with

Accepted Answer

A)  only manual systems of accounting. 
B)  the extent of government regulations. 
C)  safeguarding assets. 
D)  preparing income tax returns. 
A)  only manual systems of accounting. 
B)  the extent of government regulations. 
C)  safeguarding assets. 
D)  preparing income tax returns.

Exam 8: Fraud, Internal Control, and Cash

An exception to disbursements being made by check is acceptable when cash is paid

A debit balance in Cash Over and Short is reported as a

An example of poor internal control is

All of the following would involve a debit memorandum except

For accounting purposes, postdated checks (checks payable in the future) are considered to be

Physical controls to safeguard assets do not include

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry:

A bank reconciliation should be prepared

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

An employee authorized to sign checks should not record

A debit memorandum issued by the bank ______________ the cash balance in the depositor's account.

A highly automated computerized system of accounting eliminates the need for internal control.

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

Which of the following would not be reported on the balance sheet as a cash equivalent?

Management is responsible for establishing a system of internal control.

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

Internal controls are concerned with

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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