Exam 2: Internal Control and Cash

Which of the following statements best describes collusion?

What is the process of ensuring that the company's records are consistent with the bank's records?

The following information is provided for a company that manufactures bicycles.The factory foreman determines when orders for materials are necessary.The orders are sent to the purchasing department that places orders with the vendors recommended by the factory foreman.When the materials are received,they are immediately delivered to a central storeroom.When invoices are received for the items purchased,they are sent to the accounting department for payment.The accounting department compares the invoices with purchase orders.If the two documents are in agreement,the invoice is approved for payment.The accounting department prepares cheques that are signed by the company treasurer. Recommend three or four improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control.

From a company's point of view,which of the following statements best describes an "outstanding cheque"?

Which of the following is NOT considered an internal control weakness?

The balance on the bank statement does NOT equal the balance per the company's records.What can be assumed from this?

As a result of the bank reconciliation process,a company will prepare an adjusting entry for a debit memo but NOT for a credit memo.

While reconciling the chequing account,the accountant notices that an error has been made in recording a cheque received by the company.The bookkeeper has recorded the receipt as $729,but the correct amount of the cheque is $279.Which of the following reconciling adjustments is necessary?

You have just accepted a part-time job at one of the campus eateries.During your training,the manager is called away to deal with a crisis and asks one of your co-workers to complete your cash register training.The co-worker proceeds to tell you that if the money in the register drawer doesn't equal the total on the cash register tape,you will be responsible for the difference.If there is a cash shortage,you must make up the shortage out of your own pocket,but if there is excess cash,you may keep the overage.Proudly,with the wink of an eye,she states,"I was short one time,right after I started working here.But I made sure,if you know what I mean,that I would never be short again." A)Evaluate this control.Is it strong or weak? What kind of behaviour will it encourage? B)Do you have a professional obligation to report your co-worker to management? Explain.

A company erroneously records a $500 deposit as $50 in its records.What must it now do when reconciling its bank statement?

Internal control over financial reporting is concerned with ensuring the reliability of the financial statements.

Figure B On June 30, a company had $1,924 in its cash account according to its general ledger. This included a deposit of $174 that was in transit on June 30. The June 30 bank statement contained the following information: Bank statement balance \2 ,178 Bank service charge 14 Collection of notes receivable 136 NSF cheque 32 -Refer to Figure B.Assuming outstanding cheques of $338,what is the company's adjusted cash balance at June 30?

The accounting records for Delta Driving School shows a cash balance of $14,134 on February 28,Year 1.On the evening of February 28,company receipts of $1,250 were placed in the bank's night deposit drop box; this deposit was processed by the bank on March 1.The February 28 bank statement shows balance of $18,877,including collection of a $6,000 note receivable plus $55 of interest earned,a service charge of $40,and a $1,550 debit memo for the payment of the company's utility bill.All of the cheques that the company had written during January were listed on the bank statement except for cheque #1908 in the amount of $1,528. A)Prepare a bank reconciliation to calculate the company's adjusted cash balance at February 28,Year 1. B)Prepare the journal entries needed to adjust the cash records as a result of the bank reconciliation procedures.

Match the following terms with their correct definition. -a bank reconciling item that must be subtracted from the unadjusted book balance when preparing a bank reconciliation

Which of the following procedures is NOT part of the preparation of a bank reconciliation for a chequing account?

The accountant prepared the firm's bank reconciliation and noted the following adjustments to the company records for its chequing account.In the table below,indicate the impact on the accounting equation of recording the various adjusting journal entries for these items by inserting an "I" for increase or "D" for decrease.It is possible that an adjustment both increases and decreases an element of the accounting equation,as in the case of the first adjustment which has been completed as an example. Stockholders 1. NSF cheques I. D 2. Cheque for utilities recorded twice by the company 3. Interest earned 4. Bank service charges 5. Bank debit memos for payment of rent 6. Bank credit memos for collection of a note receivable

Which of the following assets is considered the most liquid?

When a bank reconciliation is being prepared,which of the following items is subtracted from the balance per the company records?

Dovetail Company is preparing its bank reconciliation for July 31,Year 1.Its bank statement and general ledger T-account for its chequing account are presented below: A) Prepare a bank reconcilation in proper form for July. Note that the begnning balance was correctly reconciled at the end of the previous month and that all outstanding cheques (numbered 744, 745, and 746) and deposits in transit from last month cleared the bank this month. B) How much cash would the company report an its July 31 balance sheet? C) What adjusting entries will the company record as a result of this bank reconciliation process? Assume that the bank correctly reported all transactions, and that any errors noted in the reconciliation process involve transactions on credit.

The account used to record the discrepancies that will occasionally occur between the amounts deposited and amounts shown on cash register tapes is called ____________________.