Exam 4: Internal Control and Cash

For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.) a.Adheres to sound internal controls b.Violates sound internal controls c.Neither strengthens nor violates internal control -Monthly statements are mailed to customers to indicate the current balance due.

Match the following terms with their correct definition. a.Bank reconciliation d.Outstanding check b.Deposit in transit e.Service charges c.Non-sufficient funds check -A bank reconciling item that must be subtracted from the unadjusted book balance when preparing a bank reconciliation

Business process risk assessment is designed to identify, analyze, and manage possible threats to the organization's success concerning ____________________ forces such as resource allocations.

The control activity "segregation of duties" is most effective in

-Refer to Dance Town Academy. How will the bank services charges be handled on a bank reconciliation?

MATCHING The accountant for a local manufacturing company is reconciling the company's bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.) a.Addition to bank balance b.Subtraction from bank balance c.Addition to company balance d.Subtraction from company balance e.Not included on the reconciliation -Customer's NSF check returned with the bank statement

Explain how a company can control small cash payments that are made in cash rather than by check.

MATCHING The accountant for a local manufacturing company is reconciling the company's bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.) a.Addition to bank balance b.Subtraction from bank balance c.Addition to company balance d.Subtraction from company balance e.Not included on the reconciliation -Bank service charge on the bank statement for new checks

As a result of the bank reconciliation process, a company will prepare an adjusting entry for a debit memo but not for a credit memo.

A customer's check for $25 that had been deposited into the company's checking account the previous month was returned stamped "NSF" by the bank. Which of the following journal entries is required?

A good system of internal control requires that the physical custody of assets be separated from the accounting for those assets. This concept is known as safeguarding of assets and records.

Collections of accounts receivable are considered to be cash equivalents.

Which internal control activity is followed when inventory storage areas are secured with limited access?

The best response to an employee caught stealing from the company is to say, "Don't ever let me catch you doing that again!"

The accounting records for Dutch Island Company shows a cash balance of $4,133 on January 31, 2013. On the evening of January 31, company receipts of $1,250 were placed in the bank's night deposit drop box; this deposit was processed by the bank on February 1. The January 31 bank statement shows balance of $8,876, including collection of a $5,000 note receivable plus $55 of interest earned, a service charge of $40, and a $550 debit memo for the payment of the company's utility bill. All of the checks that the company had written during January were listed on the bank statement except for check #731 in the amount of $1,528. Prepare a bank reconciliation to calculate the company's adjusted cash balance at January 31, 2013.

Deal Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for December 2013 indicated the following: An analysis of canceled checks and deposits and the records of Deal revealed the following items: The correct amount of check # 267 is $340, but it was recorded as a cash disbursement of $430. The check was issued to pay for merchandise purchased. The check was written correctly and appeared on the bank statement correctly.

Having one employee prepare company checks and sign those checks relates to which internal control activity?

"You Decide" Essay You are an entrepreneur about to open a coffee and internet cafe near your college campus. You have decided to accept cash and credit and will use college student employees. While you plan to be at the shop during most hours that the business will be open, you have made one of the student employees your assistant manager to manage in your absence.Describe at least five procedures that you might use to provide adequate internal control over cash and credit sales and bank deposits.

For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.) a.Adheres to sound internal controls b.Violates sound internal controls c.Neither strengthens nor violates internal control -Checks are signed by the clerk in the accounting department.

If a company has an internal audit function, it does not need to have external auditors.