Question 1

Which of the following is representative of safeguarding assets?

Accepted Answer

A)  keeping office supplies under lock and key 
B)  reducing expense to increase operating profit 
C)  increasing operating profit to increase net income 
D)  ensuring maximum use of resources 
A)  keeping office supplies under lock and key 
B)  reducing expense to increase operating profit 
C)  increasing operating profit to increase net income 
D)  ensuring maximum use of resources

Question 2

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.
Based on this information, prepare a bank reconciliation for Fire Steel Inc. as of February 28, 2013.

Accepted Answer

The answer of The following information is needed to reconcile...

Question 3

Sarbanes-Oxley Act requires all the private companies in the U.S. to maintain an internal control system.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following items must be examined by the controller or treasurer before signing a check?

Accepted Answer

A)  the ledger 
B)  the purchase order 
C)  the confirmation report 
D)  the journal entry 
A)  the ledger 
B)  the purchase order 
C)  the confirmation report 
D)  the journal entry

Question 5

The difference that arises between the balance on the bank statement and the balance on the company's books because of a time lag in recording transactions is known as a permanent difference.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A basic principle of internal control over cash receipts is that the deposit of the cash and the recording of the receipts into the journal should be separated.

Accepted Answer

A) True 
 B)False

Question 8

In a bank reconciliation, outstanding checks will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

A document authorizing a cash payment is a(n):

Accepted Answer

A)  check. 
B)  invoice. 
C)  voucher. 
D)  bill of lading. 
A)  check. 
B)  invoice. 
C)  voucher. 
D)  bill of lading.

Question 13

The Fingertips Company had the following financial data for the year ended December 31, 2015: $$\begin{array} { | l | r |} 
\hline \text { Cash } & \$ 45,000 \
\hline \text { Cash equivalents } & 80,000 \
\hline \text { Long term investments } & 60,000 \
\hline \text { Total current liabilities } & 150,000 \
\hline
\end{array}$$ What is the cash ratio as of December 31, 2015, for Fingertips Company?

Accepted Answer

A)  0.30 
B)  0.40 
C)  0.53 
D)  0.83 
A)  0.30 
B)  0.40 
C)  0.53 
D)  0.83

Question 14

A petty cash fund was established with a $350 balance. It currently has cash of $41 and petty cash tickets totaling $309. Which of the following would be included in the entry to replenish the fund?

Accepted Answer

A)  a credit to Petty Cash for $309 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  a credit to Cash for $309 
A)  a credit to Petty Cash for $309 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  a credit to Cash for $309

Question 15

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Accepted Answer

A) True 
 B)False

Question 16

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

A) True 
 B)False

Question 17

A petty cash fund was established with a $350 balance. It currently has cash of $41 and petty cash tickets totaling $309. Which of the following would be included in the entry to replenish the fund?

Accepted Answer

A)  a credit to Petty Cash for $309 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  debits to various expenses for $309 
A)  a credit to Petty Cash for $309 
B)  a debit to Petty Cash for $41 
C)  a credit to Cash for $41 
D)  debits to various expenses for $309

Question 18

A point-of-sale terminal provides control over cash receipts over the counter.

Accepted Answer

A) True 
 B)False

Question 19

A company's cash ledger shows an ending balance of $4,000. Reconciling items included a bookkeeper error of $100 (a $500 check recorded as $600), two outstanding checks totaling $820, a service charge of $25, a deposit in transit of $280, and interest revenue of $31. What is the adjusted book balance?

Accepted Answer

A)  $3,894 
B)  $3,460 
C)  $4,106 
D)  $4,540 
A)  $3,894 
B)  $3,460 
C)  $4,106 
D)  $4,540

Question 20

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

Accepted Answer

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

Exam 8: Internal Control and Cash

Which of the following is representative of safeguarding assets?

Sarbanes-Oxley Act requires all the private companies in the U.S. to maintain an internal control system.

Which of the following items must be examined by the controller or treasurer before signing a check?

The difference that arises between the balance on the bank statement and the balance on the company's books because of a time lag in recording transactions is known as a permanent difference.

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

A basic principle of internal control over cash receipts is that the deposit of the cash and the recording of the receipts into the journal should be separated.

In a bank reconciliation, outstanding checks will be shown on the bank side of the reconciliation.

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

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.

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

A document authorizing a cash payment is a(n):

The Fingertips Company had the following financial data for the year ended December 31, 2015: Cash \ 45,000 Cash equivalents 80,000 Long term investments 60,000 Total current liabilities 150,000 What is the cash ratio as of December 31, 2015, for Fingertips Company?

A petty cash fund was established with a $350 balance. It currently has cash of $41 and petty cash tickets totaling $309. Which of the following would be included in the entry to replenish the fund?

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

A petty cash fund was established with a $350 balance. It currently has cash of $41 and petty cash tickets totaling $309. Which of the following would be included in the entry to replenish the fund?

A point-of-sale terminal provides control over cash receipts over the counter.

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

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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