Exam 8: Internal Control and Cash

Separation of duties limits fraud and promotes the accuracy of the account records.

Which of the following describes the internal control procedure separation of duties?

For added security, businesses generally prefer to pay employees by issuing cheques rather than electronic funds transfer.

When designing a system of internal control, every procedure should be implemented strictly and properly, regardless of the cost.

The following information is needed to reconcile the cash balance for Woods Paper Products. • A deposit of $5 794.62 is in transit. • Outstanding cheques total $1 533.25. • The book balance is $5 695.62. • The bookkeeper recorded a $1 524.00 cheque as $15 240 in payment of the current month's rent. • The bank balance at 28 February 2014 was $16 500.25. • A deposit of $300 was credited by the bank for $3 000. • A customer's cheque for $1 280 was returned for nonsufficient funds. • The bank service charge is $70. What was the adjusted bank balance?

If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash.

Regarding controls over cash receipts by mail, the bank deposit slip should be compared to the remittance advices by the accounting department.

Daily cash shorts and cash overs should cancel each other out over time.

In a bank reconciliation, outstanding cheques will be shown on the bank side of the reconciliation.

The following information is available for Andersen Company for the month ending 30 June 2014. • Balance per the bank statement is $10 241.43. • Balance per books is $9 745.06. • cheque #506 for $1 948.52 and cheque #510 for $1 800.25 were not shown on the 30 June bank statement. • A deposit in transit of $5 113.40 had not been received by the bank when the bank statement was generated. • A bank debit memo indicated a dishonoured cheque in the amount of $79 written by Bruce Garrett to Andersen Company on 13 June. • A bank credit memo indicated a bill collected by the bank of $1 900 and interest revenue of $75 on 20 June. • The bank statement indicated service charges of $35. What is the adjusted book balance?

On a bank reconciliation, deposits in transit are subtracted on the book side of the reconciliation.

'Access creep' occurs when:

Which of the following is the first step in the purchasing and payment process?

If a system of internal controls is too strict or complex, it may harm efficiency and not be cost- effective.

A petty cash fund was established with a $250 balance. It currently has cash of $31 and petty cash slips totalling $219. Which of the following would be included in the entry to replenish the fund?

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

In the following situation, which internal control procedure needs strengthening? At Hofstra Services, the accounting clerk fills out unnumbered purchase order forms for purchases of supplies. An operations engineer completes the form with a detailed description of the supplies being ordered, and the operations manager approves the purchase and passes the purchase order back to the accountant for processing.

Keeping office supplies under lock and key is representative of:

A 'cash short' situation exists where the cash register tape total is less than the cash on hand at the end of the day.

The control environment is one of the five components by which a company can achieve its internal control objectives.