Exam 7: Fraud, Internal Control, and Cash

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

Identify the internal control procedures applicable to cash disbursements followed by Downey Company in each of the following cases. 1. Company checks are pre-numbered. 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.

Harnish 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 $127 written to the company by J. Chandler was returned NSF. 2. The monthly service charge by the bank was $20. 3. The bank collected a $1,000 note plus interest of $100 on the company's behalf. The company had not accrued the interest.

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

On April 30, the bank reconciliation of Baxter Company shows three outstanding checks: no. 354, $650, no. 355, $820, and no. 357, $615. The May bank statement and the May cash payments journal show the following. Instructions Using step 2 in the reconciliation procedure, list the outstanding checks at May 31.

Internal control is most effective when several people are responsible for a given task.

Entries are made to the Petty Cash account when

Cash registers are an important internal control device used in controlling over-the-counter receipts.

Identify whether each of the following items would be (a) added to the book balance, or (b) deducted from the book balance in a bank reconciliation. 1. EFT transfer to a supplier 2. Bank service charge 3. Check printing charge 4. Error recording check # 214 which was written for $450 but recorded for $540 5. Collection of note and interest by bank on company's behalf

A bank reconciliation is generally prepared by the bank and sent to the depositor along with cancelled checks.

In the month of November, Kinsey Company Inc. wrote checks in the amount of $18,500. In December, checks in the amount of $25,316 were written. In November, $16,936 of these checks were presented to the bank for payment, and $21,766 were presented in December. What is the amount of outstanding checks at the end of November?

Bell Food Store developed the following information in recording its bank statement for the month of March. (1) Checks written in March but still outstanding $7,000. (2) Checks written in February but still outstanding $3,100. (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 $593 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as payment on account for $539. (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 $3,000 plus $100 interest revenue. Instructions Prepare a bank reconciliation at March 31.

A bank reconciliation should be prepared

Checks received through the mail should

A __________________ fund is used to pay relatively small expenditures.

GAAP, compared to IFRS, tends to be more

The petty cash fund eliminates the need for a bank checking account.

In the month of May, Kijak Company Inc. wrote checks in the amount of $56,000. In June, checks in the amount of $76,000 were written. In May, $50,000 of these checks were presented to the bank for payment, and $66,000 in June. What is the amount of outstanding checks at the end of June?

When two or more people get together for the purpose of circumventing prescribed controls, it is called

The size of the petty cash fund is dependent on