Question 1

Which of the following is NOT an appropriate internal control for cash receipts over the counter?

Accepted Answer

A)  A receipt is issued for each transaction to ensure that each sale is recorded. 
B)  The store clerk deposits the cash in the bank. 
C)  At the end of the day, the manager proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
D)  The cash draw opens after the store clerk enters a transaction. 
A)  A receipt is issued for each transaction to ensure that each sale is recorded. 
B)  The store clerk deposits the cash in the bank. 
C)  At the end of the day, the manager proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
D)  The cash draw opens after the store clerk enters a transaction.

Question 2

Electronic funds transfers are a system that transfers cash by using paper documents.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an issue that must be addressed in the internal controls for e-commerce?

Accepted Answer

A)  burglar alarms 
B)  tone at the top 
C)  phishing expeditions 
D)  need for outside auditors 
A)  burglar alarms 
B)  tone at the top 
C)  phishing expeditions 
D)  need for outside auditors

Question 4

Which of the following is the basic internal control procedure with respect to cash receipts?

Accepted Answer

A)  depositing all cash receipts in the bank shortly after the cash is received 
B)  requiring customers to pay with debit or credit cards 
C)  requiring the accountants to make the bank deposits 
D)  preventing collusion 
A)  depositing all cash receipts in the bank shortly after the cash is received 
B)  requiring customers to pay with debit or credit cards 
C)  requiring the accountants to make the bank deposits 
D)  preventing collusion

Question 5

A petty cash fund was established with a $250 balance. It currently has cash of $38 and petty cash tickets totaling $212 for travel expense. Prepare the journal entry to record the replenishment of the fund. Omit explanation.

Accepted Answer

Journal entry
 \[\begin{array}

Question 6

Goldman Services hired a new clerk to keep custody of and maintain all the equipment in the equipment yard. The clerk has not yet been adequately trained on the maintenance needs of the equipment. 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 7

Which of the following is true of 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" or the culture 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" or the culture of the business.

Question 8

Which of the following items will NOT appear as deductions on a bank statement?

Accepted Answer

A)  NSF checks 
B)  EFT 
C)  Service Charge 
D)  Deposits 
A)  NSF checks 
B)  EFT 
C)  Service Charge 
D)  Deposits

Question 9

Prepare the journal entries for the following petty cash transactions of City Coffee Shop. Omit explanation.
 $$\begin{array} { | l | l | } 
\hline \text { Sept. } 10 & \text { Established a petty cash fund with a } \$ 300 \text { balance. } \
\hline & \text { The petty cash fund has } \$ 105 \text { in cash and } \$ 200 \text { in petty } \
& \text { cash tickets there were issued to pay for Delivery Expense } \
& ( \$ 115 ) \text { and Postage Expense ( } \$ 85 ) \text {. Replenished the fund } \
\text { Sept. } 30 & \text { and recorded the expenditures. } \
\hline \text { Oct. } 15 & \text { Decreased the balance of the petty cash fund to } \$ 250 . \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | r | r | } 
\

Question 10

Evaluated Receipts Settlement is ________.

Accepted Answer

A)  a streamlined process that bypasses paper documents altogether 
B)  a process that eliminates the need for separation of duties 
C)  a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order 
D)  an organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting records 
A)  a streamlined process that bypasses paper documents altogether 
B)  a process that eliminates the need for separation of duties 
C)  a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order 
D)  an organizational plan and all the related measures adopted by an entity to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate and reliable accounting records

Question 11

Electronic funds transfers ________.

Accepted Answer

A)  are more expensive than mailing a check to make a payment 
B)  are a way of moving cash by paper documents 
C)  include direct deposits and debit card transactions 
D)  do not appear on the bank statement 
A)  are more expensive than mailing a check to make a payment 
B)  are a way of moving cash by paper documents 
C)  include direct deposits and debit card transactions 
D)  do not appear on the bank statement

Question 12

Which of the following is the first step in the purchasing and payment process?

Accepted Answer

A)  The purchaser receives an invoice for the goods shipped by the supplier. 
B)  The purchaser sends a check to the supplier. 
C)  The purchaser sends a purchase order to the supplier. 
D)  The purchaser receives the inventory and prepares a receiving report. 
A)  The purchaser receives an invoice for the goods shipped by the supplier. 
B)  The purchaser sends a check to the supplier. 
C)  The purchaser sends a purchase order to the supplier. 
D)  The purchaser receives the inventory and prepares a receiving report.

Question 13

Match each term with its description.
-Receiving Report

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 14

External auditors evaluate company controls to ensure the financial statements are presented fairly, in accordance with Generally Accepted Accounting Principles.

Accepted Answer

A) True 
 B)False

Question 15

A petty cash fund was established with a $525 balance. It currently has cash of $65 and petty cash tickets as shown below: $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 120 \
\hline \text { Office supplies expense } & 310 \
\hline \text { Equipment rental expense } & 30 \
\hline
\end{array}$$ Which of the following would be the journal entry to replenish the Petty Cash account?

Accepted Answer

A)  debit various expenses $460; credit Cash $460 
B)  debit various expenses $460; credit Petty Cash $460 
C)  debit Cash $65; credit various expenses $65 
D)  credit Petty Cash $460; debit Cash $460 
A)  debit various expenses $460; credit Cash $460 
B)  debit various expenses $460; credit Petty Cash $460 
C)  debit Cash $65; credit various expenses $65 
D)  credit Petty Cash $460; debit Cash $460

Question 16

A customer's check for $1,210 was returned for nonsufficient funds. Which of the following journal entries is needed to adjust for the NSF check?

Accepted Answer

A)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 1,210 & \
\hline \text { Sales Revenue } & & 1,210 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { NSF Check } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Receivable } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 1,210 & \
\hline \text { Sales Revenue } & & 1,210 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | r | r | } 
\hline \text { NSF Check } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 1,210 & \
\hline \text { Cash } & & 1,210 \
\hline
\end{array}$$

Question 17

In reconciling a bank statement, the bank balance is $2,100, and the checkbook balance is $2,001. Which of the following is the most probable reason for the bank balance being larger than the book balance?

Accepted Answer

A)  There are outstanding checks. 
B)  The bank has deducted certain amounts for bank service charges. 
C)  A deposit in transit was made at the end of the month. 
D)  The company erroneously recorded a check for an amount less than the actual amount. 
A)  There are outstanding checks. 
B)  The bank has deducted certain amounts for bank service charges. 
C)  A deposit in transit was made at the end of the month. 
D)  The company erroneously recorded a check for an amount less than the actual amount.

Question 18

Separating the custody of assets from accounting implies that the accountants must not handle cash and the cashier must not have access to the accounting records.

Accepted Answer

A) True 
 B)False

Question 19

As long as the same person deposits customer checks and makes the journal entry to customer accounts, there will be good internal control over cash receipts.

Accepted Answer

A) True 
 B)False

Question 20

The bank recorded a $3,000 deposit as $300. How would this information be included on the bank reconciliation?

Accepted Answer

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

Exam 7: Internal Control and Cash

Which of the following is NOT an appropriate internal control for cash receipts over the counter?

Electronic funds transfers are a system that transfers cash by using paper documents.

Which of the following is an issue that must be addressed in the internal controls for e-commerce?

Which of the following is the basic internal control procedure with respect to cash receipts?

A petty cash fund was established with a $250 balance. It currently has cash of $38 and petty cash tickets totaling $212 for travel expense. Prepare the journal entry to record the replenishment of the fund. Omit explanation.

Goldman Services hired a new clerk to keep custody of and maintain all the equipment in the equipment yard. The clerk has not yet been adequately trained on the maintenance needs of the equipment. Which internal control procedure needs strengthening?

Which of the following is true of the internal control component-information system?

Which of the following items will NOT appear as deductions on a bank statement?

Evaluated Receipts Settlement is ________.

Electronic funds transfers ________.

Which of the following is the first step in the purchasing and payment process?

Match each term with its description. -Receiving Report

External auditors evaluate company controls to ensure the financial statements are presented fairly, in accordance with Generally Accepted Accounting Principles.

A petty cash fund was established with a $525 balance. It currently has cash of $65 and petty cash tickets as shown below: Travel expense \ 120 Office supplies expense 310 Equipment rental expense 30 Which of the following would be the journal entry to replenish the Petty Cash account?

A customer's check for $1,210 was returned for nonsufficient funds. Which of the following journal entries is needed to adjust for the NSF check?

In reconciling a bank statement, the bank balance is $2,100, and the checkbook balance is $2,001. Which of the following is the most probable reason for the bank balance being larger than the book balance?

Separating the custody of assets from accounting implies that the accountants must not handle cash and the cashier must not have access to the accounting records.

As long as the same person deposits customer checks and makes the journal entry to customer accounts, there will be good internal control over cash receipts.

The bank recorded a $3,000 deposit as $300. How would this information be included on the bank reconciliation?

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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