Question 1

List and briefly discuss the five components of internal control.

Accepted Answer

1.Control procedures are designed to ens

Question 2

To help prevent theft by the sales clerk,at the end of each day,the manager proves the cash by comparing the cash in the drawer against the cash register's record of cash sales.

Accepted Answer

A) True 
 B)False

Question 3

The payee is the issuer of a check.

Accepted Answer

A) True 
 B)False

Question 4

Vaughan Services hires a new accountant to maintain its petty cash fund.Although the employee possesses an accounting degree,he/she had been previously convicted of embezzlement.Which internal control procedure needs to be addressed in this situation?

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 5

Two or more people working together to circumvent internal controls and defraud a company is known as ________.

Accepted Answer

A)  encryption 
B)  firewall 
C)  collusion 
D)  separation of duties 
A)  encryption 
B)  firewall 
C)  collusion 
D)  separation of duties

Question 6

Under the net method of handling credit and debit card payments,the ________.

Accepted Answer

A)  net amount of the sale is credited to the Sales Revenue account on the date of sale 
B)  credit to the sales revenue is selling price less the transaction fee 
C)  business writes a check to the third-party processor for the processing fee 
D)  processing fee is debited to the Credit Card Expense account on the date of sale 
A)  net amount of the sale is credited to the Sales Revenue account on the date of sale 
B)  credit to the sales revenue is selling price less the transaction fee 
C)  business writes a check to the third-party processor for the processing fee 
D)  processing fee is debited to the Credit Card Expense account on the date of sale

Question 7

If the bank reconciliation includes a bank service charge,a journal entry is required,which debits Bank Expense and credits Cash.

Accepted Answer

A) True 
 B)False

Question 8

The bank statement reveals an EFT received from a customer that has not yet been recorded in the journal.How would this information be included on the bank reconciliation?

Accepted Answer

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

Question 9

A petty cash fund was established with a $550 balance.It currently has cash of $105 and petty cash tickets as shown below: $$\begin{array} { | l | r | } 
\hline \text { Travel expense } & \$ 105 \
\hline \text { Office supplies expense } & 310 \
\hline \text { Equipment rental expense } & 30 \
\hline
\end{array}$$ Which of the following would be the journal entry to replenish the Petty Cash account?

Accepted Answer

A)  debit various expenses $445; credit Cash $445 
B)  debit various expenses $445; credit Petty Cash $445 
C)  debit Cash $105; credit various expenses $105 
D)  credit Petty Cash $445; debit Cash $445 
A)  debit various expenses $445; credit Cash $445 
B)  debit various expenses $445; credit Petty Cash $445 
C)  debit Cash $105; credit various expenses $105 
D)  credit Petty Cash $445; debit Cash $445

Question 10

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted on time.

Accepted Answer

A) True 
 B)False

Question 11

In a bank reconciliation,a book error will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 12

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 13

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer.
Baker Auto Supply purchases merchandise inventory from A & B Company.The accountant places the order,verifies receipt of the merchandise,and records the transaction in the general journal.

Accepted Answer

Weakness
There is a weakness in the sepa

Question 14

Which of the following describes a firewall?

Accepted Answer

A)  a malicious program that enters program code or destroys data without authorization 
B)  when two or more people cooperate together to defraud a company 
C)  a technique for protecting data 
D)  when a company defrauds its suppliers by making false claims 
A)  a malicious program that enters program code or destroys data without authorization 
B)  when two or more people cooperate together to defraud a company 
C)  a technique for protecting data 
D)  when a company defrauds its suppliers by making false claims

Question 15

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 16

To be IFRS compliant,foreign companies are not required to have their internal controls audited by outside auditors.

Accepted Answer

A) True 
 B)False

Question 17

If competent,reliable,and ethical employees are hired,there is no need to adequately supervise their work.

Accepted Answer

A) True 
 B)False

Question 18

Banks must return physical copies of the maker's canceled checks.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Internal Control and Cash

List and briefly discuss the five components of internal control.

To help prevent theft by the sales clerk,at the end of each day,the manager proves the cash by comparing the cash in the drawer against the cash register's record of cash sales.

The payee is the issuer of a check.

Vaughan Services hires a new accountant to maintain its petty cash fund.Although the employee possesses an accounting degree,he/she had been previously convicted of embezzlement.Which internal control procedure needs to be addressed in this situation?

Two or more people working together to circumvent internal controls and defraud a company is known as ________.

Under the net method of handling credit and debit card payments,the ________.

If the bank reconciliation includes a bank service charge,a journal entry is required,which debits Bank Expense and credits Cash.

The bank statement reveals an EFT received from a customer that has not yet been recorded in the journal.How would this information be included on the bank reconciliation?

A petty cash fund was established with a $550 balance.It currently has cash of $105 and petty cash tickets as shown below: Travel expense \ 105 Office supplies expense 310 Equipment rental expense 30 Which of the following would be the journal entry to replenish the Petty Cash account?

Internal control is an organizational plan that ensures that the financial statements are prepared and submitted on time.

In a bank reconciliation,a book error will be shown on the bank side of the reconciliation.

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.

Which of the following describes a firewall?

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

To be IFRS compliant,foreign companies are not required to have their internal controls audited by outside auditors.

If competent,reliable,and ethical employees are hired,there is no need to adequately supervise their work.

Banks must return physical copies of the maker's canceled checks.

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

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

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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