Question 1

Regarding controls over cash receipts by mail, the accounting department should prepare the deposit ticket from the remittance advices.

Accepted Answer

A) True 
 B)False

Question 2

Public companies ________.

Accepted Answer

A)  must issue an internal control report which states that the outside auditor is responsible for the adequacy of internal controls 
B)  are audited by accounting firms that do not also provide certain consulting services to the public company 
C)  are required by the Financial Accounting Standards Board to maintain a system of internal controls 
D)  are overseen by the Public Company Accounting Oversight Board 
A)  must issue an internal control report which states that the outside auditor is responsible for the adequacy of internal controls 
B)  are audited by accounting firms that do not also provide certain consulting services to the public company 
C)  are required by the Financial Accounting Standards Board to maintain a system of internal controls 
D)  are overseen by the Public Company Accounting Oversight Board

Question 3

The imprest system requires that the petty cash box contain cash and petty cash tickets that total the amount of the imprest balance only at the end of each month.

Accepted Answer

A) True 
 B)False

Question 4

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 5

At the end of each day, the accountant proves the cash by comparing the cash in the drawer against the point-of-sale terminal record of cash sales.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following components of internal control consist of work performed by internal and external auditors?

Accepted Answer

A)  monitoring of controls 
B)  information systems 
C)  control procedures 
D)  control environment 
A)  monitoring of controls 
B)  information systems 
C)  control procedures 
D)  control environment

Question 7

The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.

Accepted Answer

A)  cash conversion cycle 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio 
A)  cash conversion cycle 
B)  cash ratio 
C)  gross profit 
D)  debt equity ratio

Question 8

Companies receive cash either over the counter, through the mail, or by electronic funds transfer.

Accepted Answer

A) True 
 B)False

Question 9

The bank charged a service fee of $55. How would this information be included on the bank reconciliation?

Accepted Answer

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

Question 10

A petty cash fund was established with a $350 balance. It currently has cash of $45 and petty cash tickets totaling $305. Which of the following would be included in the entry to replenish the fund?

Accepted Answer

A)  a credit to Petty Cash for $305 
B)  a debit to Petty Cash for $45 
C)  a credit to Cash for $45 
D)  a debit to various expenses for $305 
A)  a credit to Petty Cash for $305 
B)  a debit to Petty Cash for $45 
C)  a credit to Cash for $45 
D)  a debit to various expenses for $305

Question 11

When a check is issued, the party who is paying the cash is referred to as the ________.

Accepted Answer

A)  payee 
B)  maker 
C)  bank signatory 
D)  depositor 
A)  payee 
B)  maker 
C)  bank signatory 
D)  depositor

Question 12

Which of the following items would require an adjusting entry after preparation of the bank reconciliation?

Accepted Answer

A)  errors made by the bank revealed by the bank reconciliation 
B)  all items on the bank's side 
C)  errors made on the books revealed by the bank reconciliation 
D)  outstanding checks 
A)  errors made by the bank revealed by the bank reconciliation 
B)  all items on the bank's side 
C)  errors made on the books revealed by the bank reconciliation 
D)  outstanding checks

Question 13

Which of the following is a requirement of the Sarbanes-Oxley Act?

Accepted Answer

A)  An outside auditor must evaluate the client's internal controls and report on the internal controls as part of the audit report. 
B)  The Public Company Accounting Oversight Board must conduct audits of public companies. 
C)  The accounting firm that audits a public client must also provide consulting services for the same client. 
D)  The Public Company Accounting Oversight Board must create new accounting standards. 
A)  An outside auditor must evaluate the client's internal controls and report on the internal controls as part of the audit report. 
B)  The Public Company Accounting Oversight Board must conduct audits of public companies. 
C)  The accounting firm that audits a public client must also provide consulting services for the same client. 
D)  The Public Company Accounting Oversight Board must create new accounting standards.

Question 14

The primary reason that businesses keep their cash in a bank account is the ability to earn interest.

Accepted Answer

A) True 
 B)False

Question 15

A company received a bank statement showing a balance of $79,000. Reconciling items included outstanding checks of $2,300 and a deposit in transit of $9,400. What is the company's adjusted bank balance?

Accepted Answer

A)  $67,300 
B)  $71,900 
C)  $86,100 
D)  $69,600 
A)  $67,300 
B)  $71,900 
C)  $86,100 
D)  $69,600

Question 16

Which of the following statements regarding a lock-box system is incorrect?

Accepted Answer

A)  Customers send their checks directly to a post office box that belongs to the company. 
B)  Internal control is tight because company personnel never touch incoming cash. 
C)  A bank employee empties the box daily and records the deposits into the company's bank account. 
D)  Cash is put into the company's bank account quickly. 
A)  Customers send their checks directly to a post office box that belongs to the company. 
B)  Internal control is tight because company personnel never touch incoming cash. 
C)  A bank employee empties the box daily and records the deposits into the company's bank account. 
D)  Cash is put into the company's bank account quickly.

Question 17

The Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.

Accepted Answer

A) True 
 B)False

Question 18

In a good internal control system, which of the following sets of documents is required for proper approval of a payment to a supplier?

Accepted Answer

A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements 
A)  a journal entry, a supplier invoice, and a description of the goods being purchased 
B)  a receiving report, an invoice, and a purchase order 
C)  a purchase order, a journal entry, and a price catalog 
D)  a supplier invoice, a bill of lading, and the supplier's financial statements

Question 19

A company received a bank statement with a balance of $6,400. Reconciling items included a bookkeeper error of $400-a $400 check recorded as $800-two outstanding checks totaling $830, a service charge of $24, a deposit in transit of $260, and interest revenue of $21. What is the adjusted bank balance?

Accepted Answer

A)  $5,475 
B)  $5,430 
C)  $5,027 
D)  $5,830 
A)  $5,475 
B)  $5,430 
C)  $5,027 
D)  $5,830

Question 20

An information system is one of the five components by which a company can achieve its internal control objectives.

Accepted Answer

A) True 
 B)False

Exam 7: Internal Control and Cash

Regarding controls over cash receipts by mail, the accounting department should prepare the deposit ticket from the remittance advices.

Public companies ________.

The imprest system requires that the petty cash box contain cash and petty cash tickets that total the amount of the imprest balance only at the end of each month.

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.

At the end of each day, the accountant proves the cash by comparing the cash in the drawer against the point-of-sale terminal record of cash sales.

Which of the following components of internal control consist of work performed by internal and external auditors?

The ________ is a measure of a company's ability to pay its current liabilities from cash and cash equivalents.

Companies receive cash either over the counter, through the mail, or by electronic funds transfer.

The bank charged a service fee of $55. How would this information be included on the bank reconciliation?

A petty cash fund was established with a $350 balance. It currently has cash of $45 and petty cash tickets totaling $305. Which of the following would be included in the entry to replenish the fund?

When a check is issued, the party who is paying the cash is referred to as the ________.

Which of the following items would require an adjusting entry after preparation of the bank reconciliation?

Which of the following is a requirement of the Sarbanes-Oxley Act?

The primary reason that businesses keep their cash in a bank account is the ability to earn interest.

A company received a bank statement showing a balance of $79,000. Reconciling items included outstanding checks of $2,300 and a deposit in transit of $9,400. What is the company's adjusted bank balance?

Which of the following statements regarding a lock-box system is incorrect?

The Sarbanes-Oxley Act requires all private companies in the United States to maintain an internal control system.

In a good internal control system, which of the following sets of documents is required for proper approval of a payment to a supplier?

An information system is one of the five components by which a company can achieve its internal control objectives.

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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