Question 1

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

Accepted Answer

A) True 
 B)False

Question 2

A cheque in the amount of $425 was returned by the bank marked "NSF". A bank service fee of $20 was charged for processing the returned cheque. Upon notification of the NSF, the company who initially received the customer's cheque will most likely

Accepted Answer

A)  reverse the customer's payment on their books to re-establish the accounts receivable for $425. 
B)  make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding. 
C)  reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit bank charges expense for the bank service fee of $20. 
D)  reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit the accounts receivable for the bank service fee of $20. 
A)  reverse the customer's payment on their books to re-establish the accounts receivable for $425. 
B)  make no changes to the accounting records but advise the customer that the payment was declined and is still outstanding. 
C)  reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit bank charges expense for the bank service fee of $20. 
D)  reverse the customer's payment on their books to re-establish the accounts receivable for $425 and debit the accounts receivable for the bank service fee of $20.

Question 3

Allowing only the treasurer to sign cheques is an example of which control activity?

Accepted Answer

A)  documentation 
B)  segregation of duties 
C)  physical controls 
D)  assignment of responsibility 
A)  documentation 
B)  segregation of duties 
C)  physical controls 
D)  assignment of responsibility

Question 4

An employee authorized to sign cheques should not record

Accepted Answer

A)  shipping documents. 
B)  mail receipts. 
C)  cash disbursement transactions. 
D)  sales transactions. 
A)  shipping documents. 
B)  mail receipts. 
C)  cash disbursement transactions. 
D)  sales transactions.

Question 5

A bank overdraft would be reported as

Accepted Answer

A)  a current liability. 
B)  accounts payable. 
C)  negative cash under current assets. 
D)  restricted cash. 
A)  a current liability. 
B)  accounts payable. 
C)  negative cash under current assets. 
D)  restricted cash.

Question 6

External auditors are usually employees of the company.

Accepted Answer

A) True 
 B)False

Question 7

Physical controls are not designed to safeguard assets from

Accepted Answer

A)  natural disasters. 
B)  employee theft. 
C)  robbery. 
D)  unauthorized use. 
A)  natural disasters. 
B)  employee theft. 
C)  robbery. 
D)  unauthorized use.

Question 8

In large companies, review and reconciliation is often assigned to

Accepted Answer

A)  shift supervisors. 
B)  management. 
C)  internal auditors. 
D)  external auditors. 
A)  shift supervisors. 
B)  management. 
C)  internal auditors. 
D)  external auditors.

Question 9

Errors give rise to unintentional misstatements in the financial statements.

Accepted Answer

A) True 
 B)False

Question 10

A cheque written by the company for $182 is incorrectly recorded as $218. On the bank reconciliation, the $36 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 11

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

External auditors

Accepted Answer

A)  evaluate the system of internal controls for the companies that employ them. 
B)  are employees of the company. 
C)  are independent of the company. 
D)  plan and perform an internal audit. 
A)  evaluate the system of internal controls for the companies that employ them. 
B)  are employees of the company. 
C)  are independent of the company. 
D)  plan and perform an internal audit.

Question 14

A bank statement

Accepted Answer

A)  lets a depositor know the financial position of the bank as of a certain date. 
B)  is a credit reference letter written by the depositor's bank. 
C)  is a bill from the bank for services provided. 
D)  shows the activity that increased or decreased the depositor's account balance. 
A)  lets a depositor know the financial position of the bank as of a certain date. 
B)  is a credit reference letter written by the depositor's bank. 
C)  is a bill from the bank for services provided. 
D)  shows the activity that increased or decreased the depositor's account balance.

Question 15

An NSF cheque that was received is recorded as an account receivable.

Accepted Answer

A) True 
 B)False

Question 16

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

Accepted Answer

A) True 
 B)False

Question 17

When the cash account has a credit balance in the general ledger, it is reported as a non-current liability.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is considered to be Cash?

Accepted Answer

A)  returned cheques 
B)  cheques 
C)  postdated cheques 
D)  stale-dated cheques 
A)  returned cheques 
B)  cheques 
C)  postdated cheques 
D)  stale-dated cheques

Question 19

The use of prenumbered cheques is an example of

Accepted Answer

A)  documentation. 
B)  review and reconciliation. 
C)  assignment of responsibility. 
D)  segregation of duties. 
A)  documentation. 
B)  review and reconciliation. 
C)  assignment of responsibility. 
D)  segregation of duties.

Question 20

NSF cheques received are accounted for by adding them to the cash balance per books.

Accepted Answer

A) True 
 B)False

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

A cheque in the amount of $425 was returned by the bank marked "NSF". A bank service fee of $20 was charged for processing the returned cheque. Upon notification of the NSF, the company who initially received the customer's cheque will most likely

Allowing only the treasurer to sign cheques is an example of which control activity?

An employee authorized to sign cheques should not record

A bank overdraft would be reported as

External auditors are usually employees of the company.

Physical controls are not designed to safeguard assets from

In large companies, review and reconciliation is often assigned to

Errors give rise to unintentional misstatements in the financial statements.

A cheque written by the company for $182 is incorrectly recorded as $218. On the bank reconciliation, the $36 error should be

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

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

External auditors

A bank statement

An NSF cheque that was received is recorded as an account receivable.

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

When the cash account has a credit balance in the general ledger, it is reported as a non-current liability.

Which of the following is considered to be Cash?

The use of prenumbered cheques is an example of

NSF cheques received are accounted for by adding them to the cash balance per books.

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

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Exam 7: Internal Control and Cash

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the person authorized to sign cheques.

A cheque in the amount of $425 was returned by the bank marked "NSF". A bank service fee of $20 was charged for processing the returned cheque. Upon notification of the NSF, the company who initially received the customer's cheque will most likely

Allowing only the treasurer to sign cheques is an example of which control activity?

An employee authorized to sign cheques should not record

A bank overdraft would be reported as

External auditors are usually employees of the company.

Physical controls are not designed to safeguard assets from

In large companies, review and reconciliation is often assigned to

Errors give rise to unintentional misstatements in the financial statements.

A cheque written by the company for $182 is incorrectly recorded as $218. On the bank reconciliation, the $36 error should be

An effective control activity results when at least two individuals are assigned to one cash drawer so that each can serve as check on the other.

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

External auditors

A bank statement

An NSF cheque that was received is recorded as an account receivable.

Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.

When the cash account has a credit balance in the general ledger, it is reported as a non-current liability.

Which of the following is considered to be Cash?

The use of prenumbered cheques is an example of

NSF cheques received are accounted for by adding them to the cash balance per books.

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations

Reporting and Analyzing Inventory

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters