Question 1

The remittance advice or copy of a cheque provides details of a transaction which may be recorded in the cash receipts journal.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is the most basic internal control for cash?

Accepted Answer

A) Checking for counterfeit bills 
B) Counting cash receipts twice 
C) Internal audit of cash procedures 
D) Keeping money in a bank account 
A) Checking for counterfeit bills 
B) Counting cash receipts twice 
C) Internal audit of cash procedures 
D) Keeping money in a bank account

Question 3

Which of the following describes the control environment?

Accepted Answer

A) The control environment is designed to ensure that the business's goals are achieved. 
B) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
C) A company must identify its risks. 
D) The control environment is the 'tone at the top' of the business. 
A) The control environment is designed to ensure that the business's goals are achieved. 
B) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
C) A company must identify its risks. 
D) The control environment is the 'tone at the top' of the business.

Question 4

Which of the following statements about internal control is FALSE?

Accepted Answer

A) Internal auditors insure that employees follow company policies. 
B) The treasurer is the officer ultimately responsible for writing of cheques. 
C) The control environment is known as the 'tone at the top.' 
D) External auditors are employees of the company. 
A) Internal auditors insure that employees follow company policies. 
B) The treasurer is the officer ultimately responsible for writing of cheques. 
C) The control environment is known as the 'tone at the top.' 
D) External auditors are employees of the company.

Question 5

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

Accepted Answer

A) True 
 B)False

Question 6

For strong controls over cash receipts, the cheques to be deposited should be sent to the cashier and the remittance advices should be sent to the accounting department.

Accepted Answer

A) True 
 B)False

Question 7

Cash in the bank is more liquid than a petty cash fund.

Accepted Answer

A) True 
 B)False

Question 8

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

A) True 
 B)False

Question 9

The bank charged a service fee of $20. How would this information be included on the bank reconciliation?

Accepted Answer

A) A deduction on the book side 
B) An addition on the book side 
C) An addition on the bank side 
D) A deduction on the bank side 
A) A deduction on the book side 
B) An addition on the book side 
C) An addition on the bank side 
D) A deduction on the bank side

Question 10

Which of the following items are both reconciling items on the book side of the reconciliation?

Accepted Answer

A) Deposit in transit and dishonoured cheque 
B) Outstanding cheques and correction of book error 
C) Bank service charge and outstanding cheques 
D) Bank service charge and correction of book error 
A) Deposit in transit and dishonoured cheque 
B) Outstanding cheques and correction of book error 
C) Bank service charge and outstanding cheques 
D) Bank service charge and correction of book error

Question 11

In a bank reconciliation, a book error will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following describes the internal control procedure competent, reliable and ethical personnel?

Accepted Answer

A) External auditors monitor internal controls. 
B) A company must train and supervise high- quality employees. 
C) A company purchases burglar alarms. 
D) The information system is critical. 
A) External auditors monitor internal controls. 
B) A company must train and supervise high- quality employees. 
C) A company purchases burglar alarms. 
D) The information system is critical.

Question 13

It is always the auditor's responsibility to set up and maintain the internal control system.

Accepted Answer

A) True 
 B)False

Question 14

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 book balance?

Accepted Answer

A) $18 061.62 
B) $20 761.62 
C) $10 140.24 
D) $6 670.38 
A) $18 061.62 
B) $20 761.62 
C) $10 140.24 
D) $6 670.38

Question 15

A system where customers send their cheques directly to the company's bank account is described as which of the following?

Accepted Answer

A) An encryption system 
B) A firewall system 
C) An imprest system 
D) Bank direct deposit system 
A) An encryption system 
B) A firewall system 
C) An imprest system 
D) Bank direct deposit system

Question 16

A voucher system uses:

Accepted Answer

A) vouchers, a voucher register and a cash receipts journal. 
B) vouchers, an inventory record, an unpaid voucher file and a paid voucher file. 
C) vouchers, a voucher register, an unpaid voucher file, a cheque register and a paid voucher file. 
D) vouchers, a purchase order register, an invoice register and a cheque register. 
A) vouchers, a voucher register and a cash receipts journal. 
B) vouchers, an inventory record, an unpaid voucher file and a paid voucher file. 
C) vouchers, a voucher register, an unpaid voucher file, a cheque register and a paid voucher file. 
D) vouchers, a purchase order register, an invoice register and a cheque register.

Question 17

A company has a petty cash fund amount of $200. When replenished, it has petty cash receipts of $15 for gas expense, $23 for postage expense, $18 for supplies expense and $12 for miscellaneous expenses. In the journal entry, Cash would be credited for:

Accepted Answer

A) $68. 
B) $132. 
C) $42. 
D) $200. 
A) $68. 
B) $132. 
C) $42. 
D) $200.

Question 18

Which of the following is retained by the customer as proof of a deposit transaction?

Accepted Answer

A) A bank reconciliation 
B) A deposit receipt 
C) A signature card 
D) A cancelled cheque 
A) A bank reconciliation 
B) A deposit receipt 
C) A signature card 
D) A cancelled cheque

Question 19

Cheque Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made?

Accepted Answer

A) Increase the bank statement balance. 
B) Increase the book balance. 
C) Decrease the bank statement balance. 
D) Decrease the book balance. 
A) Increase the bank statement balance. 
B) Increase the book balance. 
C) Decrease the bank statement balance. 
D) Decrease the book balance.

Question 20

Which of the following is TRUE of internal control?

Accepted Answer

A) A company's outside auditor is responsible for the company's internal control system. 
B) Internal control procedures tend to diminish the importance of operational efficiency. 
C) One of the major purposes of internal control is to ensure accurate, reliable accounting records. 
D) Internal controls are only necessary for large businesses. 
A) A company's outside auditor is responsible for the company's internal control system. 
B) Internal control procedures tend to diminish the importance of operational efficiency. 
C) One of the major purposes of internal control is to ensure accurate, reliable accounting records. 
D) Internal controls are only necessary for large businesses.

Exam 8: Internal Control and Cash

The remittance advice or copy of a cheque provides details of a transaction which may be recorded in the cash receipts journal.

Which of the following is the most basic internal control for cash?

Which of the following describes the control environment?

Which of the following statements about internal control is FALSE?

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

For strong controls over cash receipts, the cheques to be deposited should be sent to the cashier and the remittance advices should be sent to the accounting department.

Cash in the bank is more liquid than a petty cash fund.

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

The bank charged a service fee of $20. How would this information be included on the bank reconciliation?

Which of the following items are both reconciling items on the book side of the reconciliation?

In a bank reconciliation, a book error will be shown on the bank side of the reconciliation.

Which of the following describes the internal control procedure competent, reliable and ethical personnel?

It is always the auditor's responsibility to set up and maintain the internal control system.

A system where customers send their cheques directly to the company's bank account is described as which of the following?

A voucher system uses:

A company has a petty cash fund amount of $200. When replenished, it has petty cash receipts of $15 for gas expense, $23 for postage expense, $18 for supplies expense and $12 for miscellaneous expenses. In the journal entry, Cash would be credited for:

Which of the following is retained by the customer as proof of a deposit transaction?

Cheque Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made?

Which of the following is TRUE of internal control?

The Role of Accounting in Business

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Receivables

Non-Current Assets: Property, Plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities, Debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Share Capital and the Balance Sheet

Companies: Effects on Retained Earnings, Share Splits and Buy-Backs, and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Appendix

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