Exam 4: Internal Control Cash

There are five components of internal control. Match the following examples to the correct internal control component.

The ABC Company is preparing its cash budget for the upcoming year. ABC ended the previous year with cash of $20,000. Collections from customers are expected to total $105,000 for the year and payments for inventory are expected to be $87,000. Operating expense payments are budgeted at $26,000. During the year, May expects to purchase $41,000 in new equipment, sell old equipment for $5,000 and receive dividends of $4,000. ABC needs to have a cash balance of $33,000 at the end of the year. Required: 1. What is the advantage of a company preparing a cash budget? 2 Prepare the cash budget for the ABC Company, including the amount of excess cash or the amount needed to be financed.

The Candy Factory has the following items: cash in a checking account, $1,200; cash in a savings account, $4,390; high-grade government securities,$3,586; accounts receivable, $3209; cash in a compensating balance agreement, $3,200. How much should appear as Cash and Cash Equivalents on the balance sheet?

Small companies cannot have internal controls since they do not have enough employees to segregate duties.

Internal controls are designed to accomplish five objectives-comply with legal requirements, promote operational efficiency, safeguard assets, encourage employees to follow company policy and:

If a bookkeeper mistakenly records a disbursement as $36 instead of the correct amount of $63, the error should be shown on the bank reconciliation as a:

A cash budget does all of the following EXCEPT:

In a lock-box system, customers send payments into a special post office box.

Depository bank accounts are an efficient way to manage cash since:

Internal control is so critical to a company that Congress passed the:

With online banking, a company still needs to wait until the bank statement is received before they can complete the bank reconciliation.

Explain why separation of duties is such an important procedure for safeguarding assets. Provide two examples of this control procedure.

A purchase order informs a vendor of the company's intention to purchase merchandise.

The beginning cash balance is $3,000, estimated cash receipts are $105,000, and estimated cash disbursements are $111,000. How much cash must be borrowed to have a desired ending balance of $5,000?

The treasurer is solely responsible for the petty cash fund.

Banks require each person authorized to sign on an account to provide a(n) ________ which protects against forgery.

Debit Company just finished its first month of operations. The cash account contains the following information: Based on the above information, prepare the company's bank reconciliation for the month of January.

The cash-budget can span any length of time.

Use the information below to prepare a bank reconciliation for Doggy Day Care Company for the month of January. • Outstanding checks as of January 30 amounted to $2,704. • Deposits in transit as of January 30 amounted to $1,879. • The ending balance per the January bank statement is $36,482. • The bank statement shows that Doggy Day Care earned $150 of interest on its bank balance for the month of January. • The bank mistakenly recorded a deposit of $2,800 as $280 on January 15. • The Doggy Day Care pays its insurance of $986 by EFT. • Bank collected a note, for $3,000. • There was a NSF check on the bank statement for $368 • The ending cash balance per the books for January before any adjustments was $36,381.

When preparing a bank reconciliation, several terms are used, which are listed below. Following the list is a series of definitions. a. bank collections b. bank reconciliation c. bank statement d. check e. deposits in transit f. electronic fund transfer g. nonsufficient funds check h. outstanding checks _____ 1. Document showing the beginning and ending balances of a particular bank account listing the month's transactions that affected the account. _____ 2. A check issued by the company and recorded on its books but not yet paid by the bank. _____ 3. System that transfers cash by electronic communication rather than by paper documents. _____ 4. Document instructing a bank to pay the designated person or business the specified amount of money. _____ 5. Collection of money by the bank on behalf of a depositor. _____ 6. A deposit recorded by the company but not yet by its bank. _____ 7. A document explaining the reasons for the difference between a depositor's records and the bank's records about the depositor's cash. _____ 8. A check for which the payer's bank account has insufficient money to pay the check. REQUIRED: Match each term with its appropriate definition.