Question 1

Keeping office supplies under lock and key is representative of:

Accepted Answer

A) safeguarding assets. 
B) following company policies. 
C) promoting operations efficiency. 
D) ensuring accurate, reliable accounting records. 
A) safeguarding assets. 
B) following company policies. 
C) promoting operations efficiency. 
D) ensuring accurate, reliable accounting records.

Question 2

A strong computer firewall is an essential element of good internal controls for e-commerce.

Accepted Answer

A) True 
 B)False

Question 3

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account, supported by the fund (cash plus payment tickets)totaling the same amount.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT a problem that must be addressed in the internal controls for commerce?

Accepted Answer

A) Trojans 
B) Stolen credit-card numbers 
C) Phishing expeditions 
D) Separation of duties 
A) Trojans 
B) Stolen credit-card numbers 
C) Phishing expeditions 
D) Separation of duties

Question 5

Please refer to the following bank reconciliation:   Journal entries are required for the reconciling items on the book side because:

Accepted Answer

A) those transactions have not yet been recorded by the bank. 
B) the adjusted balances on both sides are the same amounts. 
C) the amounts are immaterial. 
D) those transactions have already occurred, but have not been recorded yet on the company books. 
A) those transactions have not yet been recorded by the bank. 
B) the adjusted balances on both sides are the same amounts. 
C) the amounts are immaterial. 
D) those transactions have already occurred, but have not been recorded yet on the company books.

Question 6

When a check is issued, the party who is paying 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 7

Under the Sarbanes-Oxley Act, the outside auditor must issue an internal control report.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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) One of the major purposes of internal control is to ensure accurate, reliable accounting records. 
C) Internal control procedures tend to diminish the importance of operational efficiency. 
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) One of the major purposes of internal control is to ensure accurate, reliable accounting records. 
C) Internal control procedures tend to diminish the importance of operational efficiency. 
D) Internal controls are only necessary for large businesses.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) The supplier ships the goods and sends an invoice to the purchaser. 
B) The purchaser sends a check to the supplier. 
C) The purchaser sends a purchase order to the supplier. 
D) The purchase receives the inventory and prepares a receiving report. 
A) The supplier ships the goods and sends an invoice to the purchaser. 
B) The purchaser sends a check to the supplier. 
C) The purchaser sends a purchase order to the supplier. 
D) The purchase receives the inventory and prepares a receiving report.

Question 13

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

Accepted Answer

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

Question 14

Which of the following statements describes a receiving report?

Accepted Answer

A) It is an order to purchase goods from a supplier. 
B) It is a statement from the supplier showing the goods purchased and the amount due. 
C) It is a report showing that the goods have been received in good condition, as ordered. 
D) It is a document authorizing a payment to a supplier. 
A) It is an order to purchase goods from a supplier. 
B) It is a statement from the supplier showing the goods purchased and the amount due. 
C) It is a report showing that the goods have been received in good condition, as ordered. 
D) It is a document authorizing a payment to a supplier.

Question 15

The following information is available for Andersen Company for the month ending June 30, 2014. • Balance per the bank statement is $10,241.43.
• Balance per books is $9,745.06.
• Check #506 for $1,948.52 and check #510 for $1,800.25 were not shown on the June 30 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 an NSF check in the amount of $79 written by Bruce Garrett to Andersen Company on June 13.
• A bank credit memo indicated a note collected by the bank of $1,900 and interest revenue of $75 on June 20.
• The bank statement indicated service charges of $35.
What is the adjusted bank balance?

Accepted Answer

A) $8,876.80 
B) $11,606.06 
C) $19,103.60 
D) $8,152.43 
A) $8,876.80 
B) $11,606.06 
C) $19,103.60 
D) $8,152.43

Question 16

A company received a bank statement showing a balance of $62,300. Reconciling items were outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company's adjusted bank balance?

Accepted Answer

A) $72,250 
B) $60,850 
C) $69,350 
D) $70,850 
A) $72,250 
B) $60,850 
C) $69,350 
D) $70,850

Question 17

Sarbanes-Oxley was passed in response to which of the following?

Accepted Answer

A) The stock market crash of 2002 
B) The savings and loan bailout 
C) The accounting scandals of WorldCom and Enron 
D) The mounting government deficit 
A) The stock market crash of 2002 
B) The savings and loan bailout 
C) The accounting scandals of WorldCom and Enron 
D) The mounting government deficit

Question 18

Which of the following items is NOT required to be examined by the controller or treasurer before signing a check?

Accepted Answer

A) The invoice 
B) The purchase order 
C) The receiving report 
D) The journal entry 
A) The invoice 
B) The purchase order 
C) The receiving report 
D) The journal entry

Question 19

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.
What was the adjusted bank balance?

Accepted Answer

A) $6,472.38 
B) $18,061.62 
C) $9,355.63 
D) $14,938.88 
A) $6,472.38 
B) $18,061.62 
C) $9,355.63 
D) $14,938.88

Question 20

In the following situation, which internal control procedure needs strengthening? Hofstra Services hired a new accountant to be responsible for the petty cash fund and the cash receipts. The newly hired employee has an accounting degree and a criminal record.

Accepted Answer

A) Assignment of responsibilities 
B) Competent, reliable, and ethical personnel 
C) Separation of duties 
D) Documents 
A) Assignment of responsibilities 
B) Competent, reliable, and ethical personnel 
C) Separation of duties 
D) Documents

Exam 7: Internal Control and Cash

Keeping office supplies under lock and key is representative of:

A strong computer firewall is an essential element of good internal controls for e-commerce.

An imprest system is a way to account for petty cash by maintaining a constant balance in the petty cash account, supported by the fund (cash plus payment tickets)totaling the same amount.

Which of the following is NOT a problem that must be addressed in the internal controls for commerce?

Please refer to the following bank reconciliation: Journal entries are required for the reconciling items on the book side because:

When a check is issued, the party who is paying the cash is referred to as the:

Under the Sarbanes-Oxley Act, the outside auditor must issue an internal control report.

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

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

Which of the following is TRUE of internal control?

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

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

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

Which of the following statements describes a receiving report?

A company received a bank statement showing a balance of $62,300. Reconciling items were outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company's adjusted bank balance?

Sarbanes-Oxley was passed in response to which of the following?

Which of the following items is NOT required to be examined by the controller or treasurer before signing a check?

In the following situation, which internal control procedure needs strengthening? Hofstra Services hired a new accountant to be responsible for the petty cash fund and the cash receipts. The newly hired employee has an accounting degree and a criminal record.

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

Filters