Question 1

Which of the following describes the internal control procedure "documents?"

Accepted Answer

A)  Mandatory vacations will improve internal control. 
B)  Separate the custody of assets from accounting. 
C)  The invoices and other documents must be pre-numbered. 
D)  A company should purchase a fireproof vault to protect legal documents. 
A)  Mandatory vacations will improve internal control. 
B)  Separate the custody of assets from accounting. 
C)  The invoices and other documents must be pre-numbered. 
D)  A company should purchase a fireproof vault to protect legal documents.

Question 2

Which of the following items are reconciling items on the bank side of the reconciliation?

Accepted Answer

A)  outstanding checks and correction of book error 
B)  deposit in transit and NSF check 
C)  deposit in transit and outstanding checks 
D)  bank service charge and correction of book error 
A)  outstanding checks and correction of book error 
B)  deposit in transit and NSF check 
C)  deposit in transit and outstanding checks 
D)  bank service charge and correction of book error

Question 3

Which of the following is one of the purposes of internal control?

Accepted Answer

A)  to encourage employees to follow company policy 
B)  to ensure timely payment of Accounts Payables 
C)  to ensure timely collection of Accounts Receivable 
D)  to guarantee that a business makes a profit 
A)  to encourage employees to follow company policy 
B)  to ensure timely payment of Accounts Payables 
C)  to ensure timely collection of Accounts Receivable 
D)  to guarantee that a business makes a profit

Question 4

Which of the following is the most basic internal control measure 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 5

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 6

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 that the assets are safeguarded. 
C)  Internal control procedures tend to diminish the importance of operational efficiency. 
D)  Internal controls are mainly used to ensure timely payment of liabilities. 
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 that the assets are safeguarded. 
C)  Internal control procedures tend to diminish the importance of operational efficiency. 
D)  Internal controls are mainly used to ensure timely payment of liabilities.

Question 7

The bookkeeper of Fire Steel Inc. recorded a $1,524.00 check as $15,240 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 13,716 & \
\hline \text { Sales Revenue } & & 13,716 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | r | r | r | } 
\hline \text { Rent Expense } & 15,240 & \
\hline \text { Cash } & & 15,240 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 13,716 & \
\hline \text { Rent Expense } & & 13,716 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Booking Error } & 1,524 & \
\hline \text { Cash } & & 1,524 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 13,716 & \
\hline \text { Sales Revenue } & & 13,716 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | r | r | r | } 
\hline \text { Rent Expense } & 15,240 & \
\hline \text { Cash } & & 15,240 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { Cash } & 13,716 & \
\hline \text { Rent Expense } & & 13,716 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Booking Error } & 1,524 & \
\hline \text { Cash } & & 1,524 \
\hline
\end{array}$$

Question 8

Which of the following is the last step in the daily control over cash receipts by mail?

Accepted Answer

A)  A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit. 
B)  The controller opens the mail and sends the remittance advices to the accounting department. 
C)  The controller compares the records of the day's bank deposit amount from the treasurer and the debit to cash from the accounting department. 
D)  The accounting department prepares journal entries to cash and the customers' accounts. 
A)  A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit. 
B)  The controller opens the mail and sends the remittance advices to the accounting department. 
C)  The controller compares the records of the day's bank deposit amount from the treasurer and the debit to cash from the accounting department. 
D)  The accounting department prepares journal entries to cash and the customers' accounts.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The bank made an EFT payment of a telephone bill of $5,000. How would this information be included on the bank reconciliation?

Accepted Answer

A)  an addition on the bank side 
B)  a deduction on the book side 
C)  an addition on the book side 
D)  a deduction on the bank side 
A)  an addition on the bank side 
B)  a deduction on the book side 
C)  an addition on the book side 
D)  a deduction on the bank side

Question 11

The following information is needed to reconcile the cash balance for Fire Steel Inc. • A deposit of $5,800 is in transit.
• Outstanding checks total $1,500.
• The book balance is $6,800 at February 28, 2013.
• The bookkeeper recorded a $1,740 check as $17,400 in payment of the current month's rent.
• The bank balance at February 28, 2013 was $18,000.
• A deposit of $400 was credited by the bank for $4,000.
• A customer's check for $3,700 was returned for nonsufficient funds.
• The bank service charge is $60.
What was the adjusted book balance?

Accepted Answer

A)  $18,720 
B)  $18,060 
C)  $18,700 
D)  $18,820 
A)  $18,720 
B)  $18,060 
C)  $18,700 
D)  $18,820

Question 12

In the following situation, which internal control procedure needs strengthening? Santhom Inc. does not have a separate accounting department. Its operating departments are also responsible for recording transactions in the books of accounts of the company apart from their main operations.

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 13

Which of the following is a key element of good internal control?

Accepted Answer

A)  having latest version of information system installed 
B)  having audits at periodic intervals 
C)  having a good working environment for employees 
D)  allowing no vacations and job rotations 
A)  having latest version of information system installed 
B)  having audits at periodic intervals 
C)  having a good working environment for employees 
D)  allowing no vacations and job rotations

Question 14

In a good internal control system, which of the following documents are required for proper approval of a payment to a supplier?

Accepted Answer

A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements 
A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements

Question 15

As long as the same person deposits customer checks and records the deposits into the journal, there will be good internal control over cash receipts.

Accepted Answer

A) True 
 B)False

Question 16

Cash and cash equivalents are divided by ________ to determine the cash ratio.

Accepted Answer

A)  total current liabilities 
B)  fixed assets 
C)  equity 
D)  total long-term liabilities 
A)  total current liabilities 
B)  fixed assets 
C)  equity 
D)  total long-term liabilities

Question 17

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 18

Regarding controls over cash receipts by mail, the bank deposit slip should be compared to the remittance advices by the accounting department.

Accepted Answer

A) True 
 B)False

Question 19

A petty cash fund was established with a $600 balance. It currently has cash of $25 and petty cash tickets as shown below. $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 130 \
\hline \text { Office supplies } & \$ 305 \
\hline \text { Equipment rental expense } & \$ 85 \
\hline
\end{array}$$ Which of the following would be the journal entry to replenish the Petty Cash account?

Accepted Answer

A)  Debit to Cash Short & Over for $55 
B)  Credit Cash Short & Over for $55 
C)  Debit Petty Cash $55 
D)  Credit Petty Cash $55 
A)  Debit to Cash Short & Over for $55 
B)  Credit Cash Short & Over for $55 
C)  Debit Petty Cash $55 
D)  Credit Petty Cash $55

Question 20

Which of the following describes the internal control procedure "assignment of responsibilities?"

Accepted Answer

A)  To validate their accounting records, a company should have an audit by an external accountant. 
B)  A company should separate the custody of assets from accounting. 
C)  The external auditors will monitor internal controls. 
D)  A company should have clearly assigned responsibilities for each position. 
A)  To validate their accounting records, a company should have an audit by an external accountant. 
B)  A company should separate the custody of assets from accounting. 
C)  The external auditors will monitor internal controls. 
D)  A company should have clearly assigned responsibilities for each position.

Exam 8: Internal Control and Cash

Which of the following describes the internal control procedure "documents?"

Which of the following items are reconciling items on the bank side of the reconciliation?

Which of the following is one of the purposes of internal control?

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

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

Which of the following is true of internal control?

The bookkeeper of Fire Steel Inc. recorded a $1,524.00 check as $15,240 in payment of the current month's rent. Which of the following journal entries is needed to adjust for this error in the books of the company?

Which of the following is the last step in the daily control over cash receipts by mail?

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

The bank made an EFT payment of a telephone bill of $5,000. How would this information be included on the bank reconciliation?

In the following situation, which internal control procedure needs strengthening? Santhom Inc. does not have a separate accounting department. Its operating departments are also responsible for recording transactions in the books of accounts of the company apart from their main operations.

Which of the following is a key element of good internal control?

In a good internal control system, which of the following documents are required for proper approval of a payment to a supplier?

As long as the same person deposits customer checks and records the deposits into the journal, there will be good internal control over cash receipts.

Cash and cash equivalents are divided by ________ to determine the cash ratio.

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

Regarding controls over cash receipts by mail, the bank deposit slip should be compared to the remittance advices by the accounting department.

A petty cash fund was established with a $600 balance. It currently has cash of $25 and petty cash tickets as shown below. Travel expense \ 130 Office supplies \ 305 Equipment rental expense \ 85 Which of the following would be the journal entry to replenish the Petty Cash account?

Which of the following describes the internal control procedure "assignment of responsibilities?"

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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