Exam 7: Fraud, Internal Control, and Cash

Firms use physical controls primarily to safeguard their assets.

The petty cash fund of $200 for Ginther Company appeared as follows on December 31, 2018: Instructions 1. Briefly describe when the petty cash fund should be replenished. Because there is cash on hand, is there a need to replenish the fund at year end on December 31? Explain. 2. Prepare in general journal form the entry to replenish the fund. 3. On December 31, the office manager gives instructions to increase the petty cash fund by $50. Make the appropriate journal entry.

Under a voucher system, a pre-numbered voucher is prepared for every

The safeguarding of assets is an objective of a company's system of internal control.

A bank may issue a credit memorandum for

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

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. Cash is locked in a safe overnight. 2. Employees who receive shipments of goods do not have access to the accounting records for merchandise. 3. Shipping documents are pre-numbered. 4. The bookkeeper does not have physical custody of assets. 5. Only the treasurer of the company can sign checks.

When making a payment from the petty cash fund for postage stamps, the following journal entry is made.

A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account which is

Unicycle Company developed the following reconciling information in preparing its September bank reconciliation: Determine the cash balance per books (before adjustments) for Unicycle Company.

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

Only large companies need to be concerned with a system of internal control.

Using the code letters below, indicate how each of the items listed would be handled in preparing a bank reconciliation. Enter the appropriate code letter in the space to the left of each item. A Add to cash balance per books B Deduct from cash balance per books C Add to cash balance per bank D Deduct from cash balance per bank E Does not affect the bank reconciliation Items: 1. Outstanding checks. 2. Bank service charge. 3. Check for $420 correctly written and paid by the bank but incorrectly entered in the cash payments journal for $240. 4. Deposit in transit. 5. Bank returns deposited check marked NSF. 6. Bank collects notes receivable and interest for depositor. 7. Bank debit memorandum for check printing fees. 8. Petty cash custodian has $91 in paid petty cash vouchers that have not been reimbursed. 9. Bank charged a check against the company which should have been charged to another company. 10. A check for $246 was correctly paid by the bank but was incorrectly entered in the cash payments journal for $264.

Cash which is restricted for a specific use should be separately reported.

Internal control is defined, in part, as a plan that safeguards

A $100 petty cash fund has cash of $16 and receipts of $82. The journal entry to replenish the account would include a

Rebekah Grace has worked for Specoly Inc., for 20 years without taking a vacation. An internal control feature that would address this situation would be

Checks received in the mail should be immediately stamped "NSF" to prevent unauthorized cashing of the check.