Question 1

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

Accepted Answer

A) True 
 B)False

Question 2

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

Accepted Answer

A)  added to the balance per books. 
B)  deducted from the balance per books. 
C)  added to the balance per bank. 
D)  deducted from the balance per bank. 
A)  added to the balance per books. 
B)  deducted from the balance per books. 
C)  added to the balance per bank. 
D)  deducted from the balance per bank.

Question 3

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 4

Clinix is a medical office management franchise. There are currently twenty-five medical offices managed by a Clinix franchisee. One of the services provided to franchisees is assistance in training various staff members.
Clinix is preparing a manual for the front office staff to use as a reference guide. It will be used in training new employees as well. One of the reasons the manual is being prepared is to stress the importance of strong internal controls.
Required:
Prepare a short paragraph, to be included in the training materials, describing the benefits of sound internal control, from the viewpoint of the employee.

Accepted Answer

All the controls discussed in this manua

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A debit memorandum would not be issued by the bank for

Accepted Answer

A)  a bank service charge. 
B)  the issuance of traveler's checks. 
C)  the wiring of funds. 
D)  the collection of a notes receivable. 
A)  a bank service charge. 
B)  the issuance of traveler's checks. 
C)  the wiring of funds. 
D)  the collection of a notes receivable.

Question 7

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation?

Accepted Answer

A)  Check for $63 recorded as $36. 
B)  Deposit of $600 recorded by bank as $60. 
C)  A returned $300 check recorded by bank as $30. 
D)  Check for $75 recorded as $57. 
A)  Check for $63 recorded as $36. 
B)  Deposit of $600 recorded by bank as $60. 
C)  A returned $300 check recorded by bank as $30. 
D)  Check for $75 recorded as $57.

Question 8

Before a check authorization is issued, the following documents must be in agreement, except for the

Accepted Answer

A)  invoice. 
B)  remittance advice. 
C)  receiving report. 
D)  purchase order. 
A)  invoice. 
B)  remittance advice. 
C)  receiving report. 
D)  purchase order.

Question 9

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds?

Accepted Answer

A)  An accounting policies manual. 
B)  Tracing any debit memorandums from the bank to the company's records. 
C)  The use of prenumbered checks. 
D)  A review of the cash budget. 
A)  An accounting policies manual. 
B)  Tracing any debit memorandums from the bank to the company's records. 
C)  The use of prenumbered checks. 
D)  A review of the cash budget.

Question 10

Which of the following is not a necessary internal control procedure for the replenishment of the petty cash fund?

Accepted Answer

A)  Segregation of duties. 
B)  Documentation procedures. 
C)  Independent internal verification. 
D)  Employee background check. 
A)  Segregation of duties. 
B)  Documentation procedures. 
C)  Independent internal verification. 
D)  Employee background check.

Question 11

Restricted cash should be reported

Accepted Answer

A)  always as a noncurrent asset. 
B)  separately on the income statement. 
C)  separately on the balance sheet. 
D)  always as a current asset. 
A)  always as a noncurrent asset. 
B)  separately on the income statement. 
C)  separately on the balance sheet. 
D)  always as a current asset.

Question 12

GAAP, compared to IFRS, tends to be more

Accepted Answer

A)  simple in accounting requirements. 
B)  rules-based. 
C)  principles-based. 
D)  simple in disclosures requirements. 
A)  simple in accounting requirements. 
B)  rules-based. 
C)  principles-based. 
D)  simple in disclosures requirements.

Question 13

The following information was taken from Hobson Company cash budget for the month of June Beginning cash balance $\quad \$ 150,000$
Cash receipts $\quad 145,000$
Cash disbursements
170,000 If the company has a policy of maintaining end-of-the-month cash balance of $125,000, the amount the company would have to borrow is

Accepted Answer

A)  $50,000. 
B)  $25,000. 
C)  $0 
D)  $75,000. 
A)  $50,000. 
B)  $25,000. 
C)  $0 
D)  $75,000.

Question 14

A $200 petty cash fund has cash of $32 and receipts of $171. The journal entry to replenish the account would include

Accepted Answer

A)  debit to Cash for $171. 
B)  credit to Petty Cash for $171. 
C)  credit to Cash over and Short for $3. 
D)  credit to Cash for $171. 
A)  debit to Cash for $171. 
B)  credit to Petty Cash for $171. 
C)  credit to Cash over and Short for $3. 
D)  credit to Cash for $171.

Question 15

Each of the following is a feature of internal control except

Accepted Answer

A)  limited access to assets. 
B)  independent internal verifications. 
C)  authorization of transactions. 
D)  generic design of documents. 
A)  limited access to assets. 
B)  independent internal verifications. 
C)  authorization of transactions. 
D)  generic design of documents.

Question 16

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

Accepted Answer

A) True 
 B)False

Question 17

Jim Gant has worked for Dr. Ken Flood for several years. Jim demonstrates a loyalty that is rare among employees. He hasn't taken a vacation in the last three years. One of Jim's primary duties at the medical office is to open the mail and list the checks received. He also takes cash from patients at the cashier window as patients leave. At times it is so hectic that Jim doesn't bother with giving patients a receipt for the cash paid on their accounts. He assures them he will see to it that they receive the proper credit. When the traffic is slow in the office Jim offers to help Lisa post the payments to the patients' accounts receivable. She is always happy to receive his help, because he is a very conscientious worker.
Instructions
Identify any principles of internal control that may be violated in this medical office situation.

Accepted Answer

Violations:
1. It is Lisa's responsibili

Question 18

The treasurer should prepare and sign a check only after authorization to issue a check has been provided.

Accepted Answer

A) True 
 B)False

Question 19

A basic principle of cash management is to increase the speed of paying liabilities.

Accepted Answer

A) True 
 B)False

Question 20

A debit balance in Cash Over and Short is reported in the income statement as ______________.

Accepted Answer

miscellane

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

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

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

A debit memorandum would not be issued by the bank for

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation?

Before a check authorization is issued, the following documents must be in agreement, except for the

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds?

Which of the following is not a necessary internal control procedure for the replenishment of the petty cash fund?

Restricted cash should be reported

GAAP, compared to IFRS, tends to be more

A $200 petty cash fund has cash of $32 and receipts of $171. The journal entry to replenish the account would include

Each of the following is a feature of internal control except

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

The treasurer should prepare and sign a check only after authorization to issue a check has been provided.

A basic principle of cash management is to increase the speed of paying liabilities.

A debit balance in Cash Over and Short is reported in the income statement as ______________.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters

Exam 7: Fraud, Internal Control, and Cash

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

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

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

A debit memorandum would not be issued by the bank for

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation?

Before a check authorization is issued, the following documents must be in agreement, except for the

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds?

Which of the following is not a necessary internal control procedure for the replenishment of the petty cash fund?

Restricted cash should be reported

GAAP, compared to IFRS, tends to be more

A $200 petty cash fund has cash of $32 and receipts of $171. The journal entry to replenish the account would include

Each of the following is a feature of internal control except

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

The treasurer should prepare and sign a check only after authorization to issue a check has been provided.

A basic principle of cash management is to increase the speed of paying liabilities.

A debit balance in Cash Over and Short is reported in the income statement as ______________.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Understanding Investments and Acquisitions in Accounting

Filters