Question 1

The ________ helps to determine a company's ability to meet its short-term obligations from cash and cash equivalents.

Accepted Answer

A)  accounts receivable turnover 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio 
A)  accounts receivable turnover 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio B

Question 2

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. A

Question 3

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

Accepted Answer

A)  the criticality of information system 
B)  the need of training and supervision of employees 
C)  monitoring of internal controls by external auditors 
D)  purchase of burglar alarms. 
A)  the criticality of information system 
B)  the need of training and supervision of employees 
C)  monitoring of internal controls by external auditors 
D)  purchase of burglar alarms. B

Question 4

In the following situation, which internal control procedure needs strengthening? The controller's duties at New Era Inc. include approving bank reconciliations, approving general journal entries, hiring administrative staff, and approving various types of administrative expenses. She needs new computer equipment for the accounting office, but there are no guidelines specifying whether she can approve purchases of office equipment.

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

Question 5

A company received a bank statement showing a balance of $75,100. Reconciling items included outstanding checks of $2,250, and a deposit in transit of $9,500. What is the company's adjusted bank balance?

Accepted Answer

A)  $63,350 
B)  $67,850 
C)  $82,350 
D)  $65,600 
A)  $63,350 
B)  $67,850 
C)  $82,350 
D)  $65,600

Question 6

Which of the following statements describes a purchase order?

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 7

A sequentially numbered document authorizing a cash payment is known as a:

Accepted Answer

A)  cash register. 
B)  voucher. 
C)  voucher register. 
D)  ledger folio. 
A)  cash register. 
B)  voucher. 
C)  voucher register. 
D)  ledger folio.

Question 8

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 earns profit. 
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 earns profit. 
D)  A company must identify its risks.

Question 9

The cash balance in a company's general ledger and the bank's balance on the bank statement will always be the same.

Accepted Answer

A) True 
 B)False

Question 10

A petty cash fund was established with a $250 balance. It currently has cash of $38 and petty cash tickets totaling $212 for travel expense. Provide the journal entry to record the replenishment of the fund.

Accepted Answer

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Question 11

A company has a petty cash fund amount of $300. When replenished, it has petty cash receipts of $30 for gas expense, $32 for postage expense, $16 for supplies expense and $10 for miscellaneous expenses. Assume the cash balance is not over or short. In the journal entry, Cash would be credited with:

Accepted Answer

A)  $88 
B)  $72 
C)  $62 
D)  $78 
A)  $88 
B)  $72 
C)  $62 
D)  $78

Question 12

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 13

Separating the custody of assets from accounting implies that the accountants must not handle cash, and the cashier must not have access to the accounting records.

Accepted Answer

A) True 
 B)False

Question 14

A(n) ________ is a security procedure designed for e-commerce.

Accepted Answer

A)  burglar alarm 
B)  firewall 
C)  fireproof vault 
D)  inventory storage 
A)  burglar alarm 
B)  firewall 
C)  fireproof vault 
D)  inventory storage

Question 15

Under the Sarbanes-Oxley Act, accounting firms are allowed to audit a public company and provide certain consulting services for the same client.

Accepted Answer

A) True 
 B)False

Question 16

The petty cash fund had an initial imprest balance of $200. It currently has $17 in cash, $3 in miscellaneous cash receipts and an additional $180 in specific cash receipts. The debit to Cash Short & Over would be:

Accepted Answer

A)  $0. 
B)  $17. 
C)  $180. 
D)  $183. 
A)  $0. 
B)  $17. 
C)  $180. 
D)  $183.

Question 17

Which of the following statements describes an invoice from a supplier?

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 18

The Sarbanes-Oxley Act was passed by the Public Company Accounting Oversight Board.

Accepted Answer

A) True 
 B)False

Question 19

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted in time.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following components of internal control consist of internal and external auditors?

Accepted Answer

A)  monitoring of controls 
B)  information systems 
C)  control procedures 
D)  control environment 
A)  monitoring of controls 
B)  information systems 
C)  control procedures 
D)  control environment

Exam 8: Internal Control and Cash

The ________ helps to determine a company's ability to meet its short-term obligations from cash and cash equivalents.

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

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

A company received a bank statement showing a balance of $75,100. Reconciling items included outstanding checks of $2,250, and a deposit in transit of $9,500. What is the company's adjusted bank balance?

Which of the following statements describes a purchase order?

A sequentially numbered document authorizing a cash payment is known as a:

Which of the following describes the control environment?

The cash balance in a company's general ledger and the bank's balance on the bank statement will always be the same.

A petty cash fund was established with a $250 balance. It currently has cash of $38 and petty cash tickets totaling $212 for travel expense. Provide the journal entry to record the replenishment of the fund.

A company has a petty cash fund amount of $300. When replenished, it has petty cash receipts of $30 for gas expense, $32 for postage expense, $16 for supplies expense and $10 for miscellaneous expenses. Assume the cash balance is not over or short. In the journal entry, Cash would be credited with:

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.

Separating the custody of assets from accounting implies that the accountants must not handle cash, and the cashier must not have access to the accounting records.

A(n) ________ is a security procedure designed for e-commerce.

Under the Sarbanes-Oxley Act, accounting firms are allowed to audit a public company and provide certain consulting services for the same client.

The petty cash fund had an initial imprest balance of $200. It currently has $17 in cash, $3 in miscellaneous cash receipts and an additional $180 in specific cash receipts. The debit to Cash Short & Over would be:

Which of the following statements describes an invoice from a supplier?

The Sarbanes-Oxley Act was passed by the Public Company Accounting Oversight Board.

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted in time.

Which of the following components of internal control consist of internal and external auditors?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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