Exam 7: Internal Control and Cash

An example of good internal controls over cash payments is the taking of all cash discounts offered.

Why would a bank require a company to maintain a compensating balance?

For each of the following, explain whether the issue would require you to prepare a journal entry for your company, assuming any original entry is correct. If an entry is required, please include it as part of your answer. (1) The bank recorded your deposit as $91 rather than the actual amount of $191. (2) Two outstanding checks amounted to $450. (3) Company check number 538 for postage was recorded incorrectly by the company bookkeeper as $50 instead of $59. (4) The bank paid a check for $500 after the company had issued a stop payment and voided the check. (5) An EFT deposit was made by one of the company's customers, Atlas Design, for merchandise received. The sale had previously been recorded when shipped and was equal to the payment amount of $125.

List the principal advantages of electronic funds transfers.

The cash account in the company's ledger is a(n)

charges for some other company's safe deposit box were posted to your account

Match the following elements of internal control: -control procedures

Which one of the following reflects a weak internal control system?

Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.

What are the processes and procedures a company uses to safeguard its assets, process information correctly, and ensure its compliance with laws are regulations called?

The debit recorded in the journal to reimburse the petty cash fund is to

Procedures designed to protect cash from theft and misuse from the time it is received until it can be deposited in a bank are called

A $135 petty cash fund has cash of $18 and receipts of $120. The journal entry to replenish the account would include a

Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records.

EFT deposit from a customer

The following items may appear on a bank statement: 1.NSF check 2.EFT deposit 3.Service charge 4.Bank correction of an error from recording a $300 deposit as $30. Indicate whether the item would appear as debit or credit memo on the bank statement and whether the item would increase or decrease the balance of your account. Use the following format:

A $200 petty cash fund has cash of $20 and receipts of $177. The journal entry to replenish the account would include a credit to

outstanding checks

A minimum cash balance required by a bank is called

A check for $342 was erroneously charged by the bank as $432. In order for the bank reconciliation to balance, you must add $90 to the bank statement balance.