Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

Proceeds from credit and debit card transactions are deposited on the day of the actual sale.

Accepted Answer

A) True 
 B)False  False

Question 3

The cash ratios of four companies are listed below. $$\begin{array} { | l | c | } 
\hline \text { Company } & \text { Cash Ratio } \
\hline \text { Jan Corp. } & 0.24 \
\hline \text { Rose, Inc. } & 0.12 \
\hline \text { Freelance, Inc. } & 0.18 \
\hline \text { Pioneer Corp. } & 0.30 \
\hline
\end{array}$$ Which company has the highest ability to repay its current liabilities?

Accepted Answer

A)  Juan Corp. 
B)  Rose, Inc. 
C)  Freelance, Inc. 
D)  Pioneer Corp. 
A)  Juan Corp. 
B)  Rose, Inc. 
C)  Freelance, Inc. 
D)  Pioneer Corp. D

Question 4

A pharmaceutical company testing drugs to determine possible side effects is a part of ________.

Accepted Answer

A)  monitoring controls 
B)  information systems 
C)  control procedures 
D)  risk assessment 
A)  monitoring controls 
B)  information systems 
C)  control procedures 
D)  risk assessment

Question 5

At Radiant, Inc., the sales department is also responsible for recording cash transactions as it does not have a separate accounting department. Which internal control procedure needs strengthening?

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 6

A system cannot be overcome or broken into if its internal controls are properly designed and structured.

Accepted Answer

A) True 
 B)False

Question 7

A very low cash ratio does not send a strong message to investors and creditors that the company has the ability to repay its short-term debt.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a benefit provided by internal control?

Accepted Answer

A)  ensuring timely collection of accounts receivables 
B)  ensuring that collusion will never happen 
C)  ensuring that a business is profitable 
D)  promoting operational efficiency 
A)  ensuring timely collection of accounts receivables 
B)  ensuring that collusion will never happen 
C)  ensuring that a business is profitable 
D)  promoting operational efficiency

Question 9

In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 10

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 only necessary for public companies. 
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 only necessary for public companies.

Question 11

Match each term with its description.
-Check

Accepted Answer

A) Sent by the vendor after the inventory has been shipped to the purchaser. 
B) Sent to the vendor when goods are ordered. 
C) Prepared by the purchaser when the goods are received. 
D) Sent to the vendor after all approving documents have been submitted. 
A) Sent by the vendor after the inventory has been shipped to the purchaser. 
B) Sent to the vendor when goods are ordered. 
C) Prepared by the purchaser when the goods are received. 
D) Sent to the vendor after all approving documents have been submitted.

Question 12

Atlas Service Company decides to increase the amount of the petty cash fund from $300 to $850. A journal entry must be made to debit the Cash account and credit the Petty Cash account for $550.

Accepted Answer

A) True 
 B)False

Question 13

The following information is available for Ellen's Fashions, Inc. for the current month. $$\begin{array} { | l | r | } 
\hline \text { Book balance end of month } & \$ 7,100 \
\hline \text { Outstanding checks } & 700 \
\hline \text { Deposits in transit } & 4,000 \
\hline \text { Service charges } & 100 \
\hline \text { Interest revenue } & 50 \
\hline
\end{array}$$ What is the adjusted book balance on the bank reconciliation?

Accepted Answer

A)  $10,250 
B)  $7,750 
C)  $6,950 
D)  $7,050 
A)  $10,250 
B)  $7,750 
C)  $6,950 
D)  $7,050

Question 14

Which of the following is used by companies to separate cash duties and establish stronger control over cash receipts?

Accepted Answer

A)  an encryption system 
B)  an imprest system 
C)  a lock-box system 
D)  a firewall system 
A)  an encryption system 
B)  an imprest system 
C)  a lock-box system 
D)  a firewall system

Question 15

When a lock-box system is used, a bank employee empties the box daily and records the deposits in the company's journal.

Accepted Answer

A) True 
 B)False

Question 16

Sales through credit cards and debit cards are journalized in the same way as sales on account.

Accepted Answer

A) True 
 B)False

Question 17

A way to account for petty cash by maintaining a constant balance in the petty cash account and which at any time requires that cash plus petty cash tickets must total the amount allocated to the petty cash fund, is known as the ________.

Accepted Answer

A)  control system 
B)  voucher system 
C)  balanced system 
D)  imprest system 
A)  control system 
B)  voucher system 
C)  balanced system 
D)  imprest system

Question 18

A(n) ________ is a device that enables members of a local network to access the network while keeping nonmembers out of the network.

Accepted Answer

A)  burglar alarm 
B)  firewall 
C)  fireproof vault 
D)  electronic sensor 
A)  burglar alarm 
B)  firewall 
C)  fireproof vault 
D)  electronic sensor

Question 19

As proof of the deposit transaction, a customer receives a canceled check from the bank.

Accepted Answer

A) True 
 B)False

Question 20

Why is it necessary to journalize transactions from the bank reconciliation? List two examples of items that need to be journalized.

Accepted Answer

The bank reconciliation is an accountant

Exam 7: Internal Control and Cash

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

Proceeds from credit and debit card transactions are deposited on the day of the actual sale.

The cash ratios of four companies are listed below. Company Cash Ratio Jan Corp. 0.24 Rose, Inc. 0.12 Freelance, Inc. 0.18 Pioneer Corp. 0.30 Which company has the highest ability to repay its current liabilities?

A pharmaceutical company testing drugs to determine possible side effects is a part of ________.

At Radiant, Inc., the sales department is also responsible for recording cash transactions as it does not have a separate accounting department. Which internal control procedure needs strengthening?

A system cannot be overcome or broken into if its internal controls are properly designed and structured.

A very low cash ratio does not send a strong message to investors and creditors that the company has the ability to repay its short-term debt.

Which of the following is a benefit provided by internal control?

In a bank reconciliation, a deposit in transit will be shown on the bank side of the reconciliation.

Which of the following is true of internal control?

Match each term with its description. -Check

Atlas Service Company decides to increase the amount of the petty cash fund from $300 to $850. A journal entry must be made to debit the Cash account and credit the Petty Cash account for $550.

The following information is available for Ellen's Fashions, Inc. for the current month. Book balance end of month \ 7,100 Outstanding checks 700 Deposits in transit 4,000 Service charges 100 Interest revenue 50 What is the adjusted book balance on the bank reconciliation?

Which of the following is used by companies to separate cash duties and establish stronger control over cash receipts?

When a lock-box system is used, a bank employee empties the box daily and records the deposits in the company's journal.

Sales through credit cards and debit cards are journalized in the same way as sales on account.

A way to account for petty cash by maintaining a constant balance in the petty cash account and which at any time requires that cash plus petty cash tickets must total the amount allocated to the petty cash fund, is known as the ________.

A(n) ________ is a device that enables members of a local network to access the network while keeping nonmembers out of the network.

As proof of the deposit transaction, a customer receives a canceled check from the bank.

Why is it necessary to journalize transactions from the bank reconciliation? List two examples of items that need to be journalized.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

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