Question 1

Which of the following is TRUE of internal control?

Accepted Answer

A)  Internal controls are only necessary for large businesses. 
B)  A company's outside auditor is responsible for the company's internal control system. 
C)  Internal control procedures tend to diminish the importance of operational efficiency. 
D)  One of the major purposes of internal control is to ensure accurate, reliable accounting records. 
A)  Internal controls are only necessary for large businesses. 
B)  A company's outside auditor is responsible for the company's internal control system. 
C)  Internal control procedures tend to diminish the importance of operational efficiency. 
D)  One of the major purposes of internal control is to ensure accurate, reliable accounting records.

Question 2

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

Accepted Answer

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

Question 3

Which of the following would be included in a journal to record a dishonoured cheque?

Accepted Answer

A)  A debit to Accounts payable and a credit to Cash 
B)  A debit to Accounts receivable and a credit to Cash 
C)  A debit to Miscellaneous expense and a credit to Cash 
D)  A debit to Cash and a credit to Accounts receivable 
A)  A debit to Accounts payable and a credit to Cash 
B)  A debit to Accounts receivable and a credit to Cash 
C)  A debit to Miscellaneous expense and a credit to Cash 
D)  A debit to Cash and a credit to Accounts receivable

Question 4

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

Accepted Answer

A) True 
 B)False

Question 5

The cash balance in a company's general ledger and the bank's balance on the bank statement will generally be different because of the time lag in recording transactions.

Accepted Answer

A) True 
 B)False

Question 6

In a bank reconciliation,a deposit in transit will be shown on the bank side of the reconciliation.

Accepted Answer

A) True 
 B)False

Question 7

It is always the auditor's responsibility to set up and maintain the internal control system.

Accepted Answer

A) True 
 B)False

Question 8

The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the ledger.How would this information be included on the bank reconciliation?

Accepted Answer

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

Question 9

Regarding controls over cash receipts by mail,the bank deposit slip should be compared to the remittance advices by the accounting department.

Accepted Answer

A) True 
 B)False

Question 10

Journal entries that are necessitated by reconciling items on the book side of the reconciliation all include either a debit to Cash or a credit to Cash.

Accepted Answer

A) True 
 B)False

Question 11

In a large company,the person who is responsible for writing cheques is the:

Accepted Answer

A)  controller. 
B)  accountant. 
C)  CFO. 
D)  CEO. 
A)  controller. 
B)  accountant. 
C)  CFO. 
D)  CEO.

Question 12

Which of the following is TRUE about a bank reconciliation?

Accepted Answer

A)  A bank reconciliation guarantees that no errors have been made. 
B)  A bank reconciliation should not be prepared by an employee who handles cash transactions. 
C)  A bank reconciliation cannot be prepared with internet banking. 
D)  A bank reconciliation is a financial statement. 
A)  A bank reconciliation guarantees that no errors have been made. 
B)  A bank reconciliation should not be prepared by an employee who handles cash transactions. 
C)  A bank reconciliation cannot be prepared with internet banking. 
D)  A bank reconciliation is a financial statement.

Question 13

In order to maintain strong internal control in a voucher system,it is important for the voucher to be prepared by the officer who signs the cheques.

Accepted Answer

A) True 
 B)False

Question 14

The petty cash fund had an initial imprest balance of $200.It currently has $18 in cash,$5 in miscellaneous cash receipts and an additional $172 in specific cash receipts.The debit to Cash short and over would be:

Accepted Answer

A)  $18. 
B)  $172. 
C)  $177. 
D)  $5. 
A)  $18. 
B)  $172. 
C)  $177. 
D)  $5.

Question 15

External auditors monitor company controls to safeguard assets and ensure that employees are following company policies.

Accepted Answer

A) True 
 B)False

Question 16

Cash in the bank is more liquid than a petty cash fund.

Accepted Answer

A) True 
 B)False

Question 17

The bookkeeper of Fire Steel Ltd recorded a $1564 cheque as $15,640 in payment of the current month's rent.Which of the following journal entries is needed to adjust for this error in the books of the company?

Accepted Answer

A)  $$\begin{array} { | c | l | l | } 
\hline \text { Cash } & 14,076 & \
\hline \text { Rent expense } & & 14,076 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Cash } & 14,076 & \
\hline \text { Sales revenue } & & 14,076 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | l | } 
\hline \text { Booking error } & 1564 & \
\hline \text { Cash } & & 1564 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | l | } 
\hline \text { Rent expense } & 15,640 & \
\hline \text { Cash } & & 15,640 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | l | l | } 
\hline \text { Cash } & 14,076 & \
\hline \text { Rent expense } & & 14,076 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | l | } 
\hline \text { Cash } & 14,076 & \
\hline \text { Sales revenue } & & 14,076 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | l | } 
\hline \text { Booking error } & 1564 & \
\hline \text { Cash } & & 1564 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | l | } 
\hline \text { Rent expense } & 15,640 & \
\hline \text { Cash } & & 15,640 \
\hline
\end{array}$$

Question 18

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

Accepted Answer

A)  Bank service charge and correction of book error 
B)  Bank service charge and outstanding cheques 
C)  Deposits in transit and dishonoured cheques 
D)  Outstanding cheques and correction of book error 
A)  Bank service charge and correction of book error 
B)  Bank service charge and outstanding cheques 
C)  Deposits in transit and dishonoured cheques 
D)  Outstanding cheques and correction of book error

Question 19

A voucher system uses:

Accepted Answer

A)  vouchers, a voucher register and a cash receipts journal. 
B)  vouchers, a voucher register, an unpaid voucher file, a cheque register and a paid voucher file. 
C)  vouchers, an inventory record, an unpaid voucher file and a paid voucher file. 
D)  vouchers, a purchase order register, an invoice register and a cheque register. 
A)  vouchers, a voucher register and a cash receipts journal. 
B)  vouchers, a voucher register, an unpaid voucher file, a cheque register and a paid voucher file. 
C)  vouchers, an inventory record, an unpaid voucher file and a paid voucher file. 
D)  vouchers, a purchase order register, an invoice register and a cheque register.

Question 20

When a cheque is issued,the party being paid the cash is referred to as the:

Accepted Answer

A)  payee. 
B)  depositor. 
C)  bank signatory. 
D)  drawer. 
A)  payee. 
B)  depositor. 
C)  bank signatory. 
D)  drawer.

Exam 8: Internal Control and Cash

Which of the following is TRUE of internal control?

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

Which of the following would be included in a journal to record a dishonoured cheque?

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

The cash balance in a company's general ledger and the bank's balance on the bank statement will generally be different because of the time lag in recording transactions.

In a bank reconciliation,a deposit in transit will be shown on the bank side of the reconciliation.

It is always the auditor's responsibility to set up and maintain the internal control system.

The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the ledger.How would this information be included on the bank reconciliation?

Regarding controls over cash receipts by mail,the bank deposit slip should be compared to the remittance advices by the accounting department.

Journal entries that are necessitated by reconciling items on the book side of the reconciliation all include either a debit to Cash or a credit to Cash.

In a large company,the person who is responsible for writing cheques is the:

Which of the following is TRUE about a bank reconciliation?

In order to maintain strong internal control in a voucher system,it is important for the voucher to be prepared by the officer who signs the cheques.

The petty cash fund had an initial imprest balance of $200.It currently has $18 in cash,$5 in miscellaneous cash receipts and an additional $172 in specific cash receipts.The debit to Cash short and over would be:

External auditors monitor company controls to safeguard assets and ensure that employees are following company policies.

Cash in the bank is more liquid than a petty cash fund.

The bookkeeper of Fire Steel Ltd recorded a $1564 cheque as $15,640 in payment of the current month's rent.Which of the following journal entries is needed to adjust for this error in the books of the company?

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

A voucher system uses:

When a cheque is issued,the party being paid the cash is referred to as the:

The Role of Accounting in Decision Making

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Retailing Operations

Retail Inventory

Accounting Information Systems

Receivables

Non-Current Assets: Property, plant and Equipment, and Intangibles

Current Liabilities and Payroll

Non-Current Liabilities,debentures Payable and Classification of Liabilities on the Balance Sheet

Partnerships

Companies: Formation and Shareholders Equity

Companies: Capital Management and the Income Statement

The Cash Flow Statement

The Framework of Accounting

Financial Statement Analysis

Introduction to Managerial Accounting and the Master Budget

Job Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

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