Question 1

When a check is issued, the party being paid the cash is referred to as the:

Accepted Answer

A) payee. 
B) maker. 
C) bank signatory. 
D) depositor. 
A) payee. 
B) maker. 
C) bank signatory. 
D) depositor.

Question 2

The following information is needed to reconcile the cash balance for Woods Paper Products. • A deposit of $5,794.62 is in transit.
• Outstanding checks total $1,533.25.
• The book balance is $5,695.62.
• The bookkeeper recorded a $1,524.00 check as $15,240 in payment of the current month's rent.
• The bank balance at February 28, 2008 was $16,500.25.
• A deposit of $300 was credited by the bank for $3,000.
• A customer's check for $1,280 was returned for nonsufficient funds.
• The bank service charge is $70.
Which of the following journal entries is needed to adjust for the booking error?

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 3

In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205. Which of the following is the MOST probable reason why the bank balance is larger than the book balance?

Accepted Answer

A) There are outstanding checks. 
B) The bank has deducted certain amounts for bank service charges. 
C) A deposit in transit was made at the end of the month. 
D) The company erroneously recorded a check for an amount less than actual. 
A) There are outstanding checks. 
B) The bank has deducted certain amounts for bank service charges. 
C) A deposit in transit was made at the end of the month. 
D) The company erroneously recorded a check for an amount less than actual.

Question 4

Before signing a check, the controller or the treasurer should examine the purchase order, the invoice, and the receiving report to determine that the company received the goods and that the company is paying only for the goods received.

Accepted Answer

A) True 
 B)False

Question 5

Petty cash is accounted for by maintaining a constant balance in the petty cash account, supported by the fund (cash plus payment tickets)totaling the same amount. What is this system called?

Accepted Answer

A) A control system 
B) A voucher system 
C) A balanced system 
D) An imprest system 
A) A control system 
B) A voucher system 
C) A balanced system 
D) An imprest system

Question 6

Journal entries must be made to record the reconciling items on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 7

A ________ is a document explaining the reasons for the difference between a depositor's cash records and the depositor's cash balance in its ledger.

Accepted Answer

A) bank statement 
B) deposit receipt 
C) bank reconciliation 
D) remittance advice 
A) bank statement 
B) deposit receipt 
C) bank reconciliation 
D) remittance advice

Question 8

Check Number 367 for $33.52 was incorrectly entered as $33.25. Which adjustment needs to be made?

Accepted Answer

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

Question 9

Please refer to the following bank reconciliation:   No journal entries are required for the reconciling items on the bank side because:

Accepted Answer

A) those transactions have already been recorded in the company ledger. 
B) the adjusted balances on both sides are the same amounts. 
C) the amounts are immaterial. 
D) those transactions are already included in the bank balance at June 30. 
A) those transactions have already been recorded in the company ledger. 
B) the adjusted balances on both sides are the same amounts. 
C) the amounts are immaterial. 
D) those transactions are already included in the bank balance at June 30.

Question 10

Which of the following describes the internal control component information system?

Accepted Answer

A) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
B) Control procedures are designed to ensure that the business's goals are achieved. 
C) Only authorized users have access to various parts of the information system. 
D) The information system is the "tone at the top" of the business. 
A) Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. 
B) Control procedures are designed to ensure that the business's goals are achieved. 
C) Only authorized users have access to various parts of the information system. 
D) The information system is the "tone at the top" of the business.

Question 11

Which of the following is NOT a key element of good internal control?

Accepted Answer

A) Having competent, reliable and ethical personnel 
B) Having periodic audits 
C) Having a good working environment for employees 
D) Having separation of duties 
A) Having competent, reliable and ethical personnel 
B) Having periodic audits 
C) Having a good working environment for employees 
D) Having separation of duties

Question 12

Which of the following describes the control environment?

Accepted Answer

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

Question 13

Cash is the most liquid of all company assets.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following items does NOT cause a difference in the bank balance and the book balance on a bank reconciliation?

Accepted Answer

A) Nonsufficient funds checks 
B) Outstanding checks 
C) Deposits in transit 
D) Canceled checks 
A) Nonsufficient funds checks 
B) Outstanding checks 
C) Deposits in transit 
D) Canceled checks

Question 17

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

Accepted Answer

A) A credit to Petty cash for $219 
B) A debit to Petty cash for $31 
C) A credit to Cash in bank for $31 
D) A credit to Cash in bank for $219 
A) A credit to Petty cash for $219 
B) A debit to Petty cash for $31 
C) A credit to Cash in bank for $31 
D) A credit to Cash in bank for $219

Question 18

If the bank reconciliation includes a bank service charge, a journal entry is required which debits Cash and credits Miscellaneous expense.

Accepted Answer

A) True 
 B)False

Question 19

The Public Company Oversight Board oversees the work of auditors of public companies.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 7: Internal Control and Cash

When a check is issued, the party being paid the cash is referred to as the:

In reconciling a bank statement, the bank balance is $1,800 and the checkbook balance is $1,205. Which of the following is the MOST probable reason why the bank balance is larger than the book balance?

Before signing a check, the controller or the treasurer should examine the purchase order, the invoice, and the receiving report to determine that the company received the goods and that the company is paying only for the goods received.

Petty cash is accounted for by maintaining a constant balance in the petty cash account, supported by the fund (cash plus payment tickets)totaling the same amount. What is this system called?

Journal entries must be made to record the reconciling items on the bank side of the reconciliation.

A ________ is a document explaining the reasons for the difference between a depositor's cash records and the depositor's cash balance in its ledger.

Check Number 367 for $33.52 was incorrectly entered as $33.25. Which adjustment needs to be made?

Please refer to the following bank reconciliation: No journal entries are required for the reconciling items on the bank side because:

Which of the following describes the internal control component information system?

Which of the following is NOT a key element of good internal control?

Which of the following describes the control environment?

Cash is the most liquid of all company assets.

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

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

Which of the following items does NOT cause a difference in the bank balance and the book balance on a bank reconciliation?

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

If the bank reconciliation includes a bank service charge, a journal entry is required which debits Cash and credits Miscellaneous expense.

The Public Company Oversight Board oversees the work of auditors of public companies.

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

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, Bonds Payable, and Classification of Liabilities on the Balance Sheet

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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