Exam 7: Internal Control and Cash

Journal entries based on the bank reconciliation are required in the company's accounts for

Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called

Match each item to a bank statement adjustment, a company books adjustment, or either. -Deposit in transit A)bank statement adjustment B)company books adjustment C)either

Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records.

All bank memos reported on the bank reconciliation require entries in the company's accounts.

A petty cash fund is used to pay relatively large amounts.

Most companies who have several bank accounts, petty cash, and cash on hand would list each separately on the balance sheet.

Match the following elements of internal control: -information and communication A)provides reasonable assurance that business goals will be achieved B)used by management for guiding operations and ensuring compliance with requirements C)overall attitude of management and employees D)used to locate weaknesses and improve controls E)identify, analyze and assess likeliness of vulnerabilities

Which of the following would be subtracted from the balance per books on a bank reconciliation?

Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is

A bank statement

Sarbanes-Oxley requires companies to maintain strong and effective internal controls and thus deter fraud and prevent misleading financial statements.

The following procedures were recently implemented at the Health Station, Inc. For each procedure, indicate whether the internal control over cash represents (1) a strength or (2) a weakness. If it is a weakness, please explain why.​ (a) All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts.​ (b) The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer's office for approval.​ (c) At the end of each day, all cash receipts are placed in the bank's night depository.​ (d) The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.

The effect of a credit memo on the company's books and the bank records is as follows:

A voucher is usually supported by

Stephanie Jo Company established a petty cash fund of $300 on May 1. At the end of the month, the petty cash fund has $42 in cash and receipts for postage, $39; entertainment, $146; and office supplies of $70.Prepare the needed journal entries, recording any discrepancy in the cash short and over account.​

Journalize the entries to record the following: March 1 Established a petty cash fund of $300.March 31 The amount of cash in the petty cash fund is now $64. The fund is replenished based on the following receipts: office supplies, $137; selling expenses, $112.Record any discrepancy in the cash short and over account.​ Journal

The effect of a debit memo on the company's books decreases an asset. On the bank's records, the debit memo:

Green Valley Bank sent Comstock Industries its end-of-month bank statement for July. The end of month balance by the bank is $11,237. The statement shows that a deposit for $4,250 is in transit at the end of the statement period. The statement also revealed that checks for $87, $105, and $95 are outstanding. Green Valley collected a $4,000 note receivable plus $120 of interest revenue. The bank charges $20 for the collection service. The bank charges a monthly account fee of $35. The end-of-month balance per company books is $11,135.​ (a) Prepare a bank/account reconciliation.(b) Write any necessary journal entries for the reconciliation.(c) If the balance sheet were prepared for Comstock Industries on July 31, what amount should be reported for cash?