Exam 8: Fraud, Internal Control, and Cash

Checks from customers who pay their accounts promptly are called outstanding checks.

Match the principle of internal control to each of the following cases. a) Establishment of responsibility b) Segregation of duties c) Accountability for assets d) Documentation procedures e) Physical controls 1. Employees' time is tracked using a time clock. 2. Employees who receive shipments of goods do not have access to the accounting records for merchandise. 3. Shipping documents are prenumbered. 4. The bookkeeper does not have physical custody of assets. 5. Only the treasurer of the company can sign checks.

Cash equivalents include each of the following except

Bank errors

On October 1, Clutter Company's petty cash fund of $120 is replenished. The fund contains cash of $40, and receipts for supplies of $55 and postage of $25. Prepare the journal entry to record the replenishment of the petty cash fund.

Employees of a company who evaluate the effectiveness of the company's system of internal controls on a year-round basis are called ______________.

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.

Match the internal control principle below with the appropriate cash disbursements procedure described. a. Establishment of responsibility b. Segregation of duties c. Documentation procedures d. Physical controls e. Independent internal verification f. Human resource controls _____ 1. Compare checks to invoices. _____ 2. Different individuals approve and make payments. _____ 3. Print check amounts by machine with indelible ink. _____ 4. Only designated personnel are authorized to sign checks. _____ 5. Each check must have approved invoice. _____ 6. Requiring employees to take vacations.

If employees are bonded

Listed below are items that may be useful in preparing the March 2010, bank reconciliation for Grider Machine Works. Using the following code, insert in the space before each item the letter where the amount would be located or otherwise treated in the bank reconciliation process. 1. Included with the bank statement materials was a check from Bob Simpson for $40 stamped "account closed." 2. A personal deposit by Jim Grider to his personal account in the amount of $300 for dividends on his General Electric common stock was credited to the company account. 3. The bank statement included a debit memorandum for $22.00 for two books of blank checks for Grider Machine Works. 4. The bank statement contains a credit memorandum for $24.75 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 $316.86, 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, 2010, for $45.00 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 $5,369.65, did not clear the bank during March. 9. On March 24, 2010, Grider Machine Works delivered to the bank for collection a $4,500, 3-month note from Don Decker. A credit memorandum dated March 29, 2010, indicated the collection of the note and $90.00 of interest. 10. The bank statement included a debit memorandum for $25.00 for the collection service on the above note and interest.

The cash account shows a balance of $45,000 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

In the month of May, Grimm Company Inc. wrote checks in the amount of $27,750. In June, checks in the amount of $37,974 were written. In May, $25,404 of these checks were presented to the bank for payment, and $32,649 in June. What is the amount of outstanding checks at the end of June?

Under a voucher system, a prenumbered voucher is prepared for every

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

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

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

Proper control for over-the-counter cash receipts includes

The ______________ of an asset should not have access to the accounting records of that asset.

Compute Whyte Company's adjusted cash balance per books based on the following information:

Using prenumbered checks and having an approved invoice for each check is an example of