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 -Although department supervisors can request a preferred supplier or vendor, the purchasing department has the responsibility for making the final decisions on a vendor.

Which of the following statements best describes the term "outstanding check" from a company's point of view?

The following information is provided for a company that manufactures bicycles. The factory foreman determines when orders for materials are necessary. The orders are sent to the purchasing department that places orders with the vendors recommended by the factory foreman. When the materials are received, they are immediately delivered to a central storeroom. When invoices are received for the items purchased, they are sent to the accounting department for payment. The accounting department compares the invoices with purchase orders. If the two documents are in agreement, the invoice is approved for payment. The accounting department prepares checks that are signed by the company treasurer. Recommend three or four improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control.

Which of the following procedures is incorrect for establishing and maintaining a petty cash fund?

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 -An amount received and recorded by the business but not yet recorded by the bank

The accountant prepared the firm's bank reconciliation and noted the following adjustments to the company records for its checking account. In the table below, indicate the impact on the accounting equation of recording the various adjusting journal entries for these items by inserting an "I" for increase or "D" for decrease. It is possible that an adjustment both increases and decreases an element of the accounting equation, as in the case of the first adjustment which has been completed as an example.

What adjustments are often necessary after the reconciliation of a bank account?

The accounting records for Dusek Dentistry, Inc. show the following information for February 28, 2013: Additional information pertaining to this checking account was obtained by comparing the monthly bank statement with the company's records. The following was revealed: A)Prepare a bank reconciliation to calculate the company's adjusted cash balance at February 28, 2013. B)Prepare the journal entries that must be recorded to adjust the cash records as a result of these bank reconciliation procedures.

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. a.One employee or department should verify the work of another.b.Specific approval is given by management for the performance of activities.c.Accounting and cash collections should be properly separated.d.Blank checks should be stored in a locked location.e.Initial entry into the accounting system should be from a consistent source with complete information. -Clearly defined authority and responsibility

Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.

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 -An accounting department employee records cash receipts from customers and prepares the bank deposit slips.

Why is cash management necessary?

A check written by a company but not yet presented to the bank for payment is called a(n)____________________.

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

A company's records indicate the balance in its checking account at the end of the month is $5,671. Comparing the company's records with the monthly bank statement reveals several additional cash transactions, such as a bank service charge of $75, a $4,000 note receivable collected by the bank plus interest earned of $100, and an NSF check for $350. Determine the company's adjusted cash balance and prepare the journal entries necessary to adjust the account balance.

The amount of cash in the cash register from sales totals $534. The amount for sales recorded on the cash register tape was $530. Which journal entry is required?

-Refer to Designs on You. What is the unadjusted cash balance according to the company's records May 31st?

An accounting system must be computerized in order to ensure the company has proper internal control.

A cost-cutting measure used in many business organization is the use of a(n)____________________ fund, whereby a custodian handles disbursements and documentation for small expenditures.

During April, Downtown Iron Works engaged in the following transactions involving it petty cash fund: Prepare the journal entries necessary to record the company's petty cash transactions.