Question 1

Promoting operational efficiency reduces expenses and business profits.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following items are reconciling items on the book side of the reconciliation?

Accepted Answer

A)  outstanding checks and correction of book error 
B)  deposit in transit and NSF check 
C)  bank service charge and outstanding checks 
D)  bank service charge and correction of book error 
A)  outstanding checks and correction of book error 
B)  deposit in transit and NSF check 
C)  bank service charge and outstanding checks 
D)  bank service charge and correction of book error

Question 3

A company which sells merchandise or services can receive cash from customers ________.

Accepted Answer

A)  over the counter 
B)  by electronic funds transfer 
C)  through the mail 
D)  in any of the above forms 
A)  over the counter 
B)  by electronic funds transfer 
C)  through the mail 
D)  in any of the above forms

Question 4

The difference that arises between the balance on the bank statement and the balance on the company's books because of a time lag in recording transactions is known as a permanent difference.

Accepted Answer

A) True 
 B)False

Question 5

List and briefly discuss the five components of internal control.

Accepted Answer

1. Control procedures are designed to en

Question 6

In a large company, the person in charge of signing checks is the controller.

Accepted Answer

A) True 
 B)False

Question 7

All items on the book side of the bank reconciliation require journal entries.

Accepted Answer

A) True 
 B)False

Question 8

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is true of the Sarbanes-Oxley Act?

Accepted Answer

A)  Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. 
B)  Those who commit securities fraud must be sentenced to 10 years in prison. 
C)  All private and foreign companies must issue an internal control report evaluated by an outside auditor. 
D)  The Public Company Accounting Oversight Board oversees the work of auditors of public companies. 
A)  Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. 
B)  Those who commit securities fraud must be sentenced to 10 years in prison. 
C)  All private and foreign companies must issue an internal control report evaluated by an outside auditor. 
D)  The Public Company Accounting Oversight Board oversees the work of auditors of public companies.

Question 10

Cash and cash equivalents are divided by ________ to determine the cash ratio.

Accepted Answer

A)  total current liabilities 
B)  fixed assets 
C)  equity 
D)  total long-term liabilities 
A)  total current liabilities 
B)  fixed assets 
C)  equity 
D)  total long-term liabilities

Question 11

A check was written by a business for $507 but was recorded in the journal as $705. How would this error be included on the bank reconciliation?

Accepted Answer

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

Question 12

If the amount of the petty cash fund is decreased, the Petty Cash Fund account should be credited.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an objective of internal control?

Accepted Answer

A)  to encourage employees to follow company policies 
B)  to ensure timely payment of accounts payable 
C)  to ensure timely collection of accounts receivable 
D)  to guarantee that a business makes a profit 
A)  to encourage employees to follow company policies 
B)  to ensure timely payment of accounts payable 
C)  to ensure timely collection of accounts receivable 
D)  to guarantee that a business makes a profit

Question 14

With cash receipts by mail, the person who is responsible for comparing the cash debit from the accounting department and the bank deposit amount is the ________.

Accepted Answer

A)  CEO 
B)  CFO 
C)  controller 
D)  treasurer 
A)  CEO 
B)  CFO 
C)  controller 
D)  treasurer

Question 15

It is difficult and costly to plan controls that can prevent collusion.

Accepted Answer

A) True 
 B)False

Question 16

A ________ is a document explaining the reasons for the difference between a depositor's Cash account in the ledger and the depositor's cash balance in its bank account.

Accepted Answer

A)  bank statement 
B)  deposit receipt 
C)  bank reconciliation 
D)  remittance advice 
A)  bank statement 
B)  deposit receipt 
C)  bank reconciliation 
D)  remittance advice

Question 17

Which of the following illustrates the internal control procedure-separation of duties?

Accepted Answer

A)  Cashiers must not have access to accounting records. 
B)  External auditors will monitor internal controls. 
C)  Electronic devices must be installed to reduce theft. 
D)  The invoices and other documents must be pre-numbered. 
A)  Cashiers must not have access to accounting records. 
B)  External auditors will monitor internal controls. 
C)  Electronic devices must be installed to reduce theft. 
D)  The invoices and other documents must be pre-numbered.

Question 18

All cash receipts should be deposited in the bank at the end of each week.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the last step in the daily control over cash receipts by mail?

Accepted Answer

A)  A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit. 
B)  The controller opens the mail and sends the remittance advices to the accounting department. 
C)  The controller compares the records of the day's bank deposit amount from the treasurer and the debit to Cash from the accounting department. 
D)  The accounting department prepares journal entries to cash and the customers' accounts. 
A)  A mailroom employee sends all customer checks to the treasurer who has the cashier make the bank deposit. 
B)  The controller opens the mail and sends the remittance advices to the accounting department. 
C)  The controller compares the records of the day's bank deposit amount from the treasurer and the debit to Cash from the accounting department. 
D)  The accounting department prepares journal entries to cash and the customers' accounts.

Question 20

Which of the following statements describes a purchase order?

Accepted Answer

A)  It is an order to purchase goods from a supplier. 
B)  It is a statement from the supplier showing the goods purchased and the amount due. 
C)  It is a report showing that the goods have been received in good condition, as ordered. 
D)  It is a document authorizing a payment to a supplier. 
A)  It is an order to purchase goods from a supplier. 
B)  It is a statement from the supplier showing the goods purchased and the amount due. 
C)  It is a report showing that the goods have been received in good condition, as ordered. 
D)  It is a document authorizing a payment to a supplier.

Exam 7: Internal Control and Cash

Promoting operational efficiency reduces expenses and business profits.

Which of the following items are reconciling items on the book side of the reconciliation?

A company which sells merchandise or services can receive cash from customers ________.

The difference that arises between the balance on the bank statement and the balance on the company's books because of a time lag in recording transactions is known as a permanent difference.

List and briefly discuss the five components of internal control.

In a large company, the person in charge of signing checks is the controller.

All items on the book side of the bank reconciliation require journal entries.

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Which of the following statements is true of the Sarbanes-Oxley Act?

Cash and cash equivalents are divided by ________ to determine the cash ratio.

A check was written by a business for $507 but was recorded in the journal as $705. How would this error be included on the bank reconciliation?

If the amount of the petty cash fund is decreased, the Petty Cash Fund account should be credited.

Which of the following is an objective of internal control?

With cash receipts by mail, the person who is responsible for comparing the cash debit from the accounting department and the bank deposit amount is the ________.

It is difficult and costly to plan controls that can prevent collusion.

A ________ is a document explaining the reasons for the difference between a depositor's Cash account in the ledger and the depositor's cash balance in its bank account.

Which of the following illustrates the internal control procedure-separation of duties?

All cash receipts should be deposited in the bank at the end of each week.

Which of the following is the last step in the daily control over cash receipts by mail?

Which of the following statements describes a purchase order?

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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