Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A petty cash fund was established with a $250 balance.It currently has cash of $40 and petty cash tickets as follows: Office expense $150 and Entertainment Expense $75.Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Accepted Answer

A) debit to Cash Short & Over for $25 
B) credit to Cash Short & Over for $15 
C) credit to Cash Short & Over for $25 
D) debit to Cash Short & Over for $15 
A) debit to Cash Short & Over for $25 
B) credit to Cash Short & Over for $15 
C) credit to Cash Short & Over for $25 
D) debit to Cash Short & Over for $15

Question 3

Which of the following would be included in the entry to record the replenishment of a petty cash fund?

Accepted Answer

A) a credit to Petty Cash 
B) a debit to Accounts Receivable 
C) a credit to Cash 
D) a credit to Miscellaneous Expense 
A) a credit to Petty Cash 
B) a debit to Accounts Receivable 
C) a credit to Cash 
D) a credit to Miscellaneous Expense

Question 4

A cash equivalent is a highly liquid investment that can be converted into cash in three years or less.

Accepted Answer

A) True 
 B)False

Question 5

At Cadmia Services,the cashier collects checks and cash from customers,and the junior accountant records the transactions in the journal.The controller approves the journal entries and bank reconciliations.The treasurer signs checks and approves contracts.
Which internal control procedure is exemplified in the above 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 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

Evaluated Receipts Settlement is ________.

Accepted Answer

A) a streamlined process that bypasses paper documents altogether 
B) a process that eliminates the need for separation of duties 
C) a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order 
D) an organizational plan and all the related measures adopted by an entity to safeguard assets,encourage employees to follow company policies,promote operational efficiency,and ensure accurate and reliable accounting records 
A) a streamlined process that bypasses paper documents altogether 
B) a process that eliminates the need for separation of duties 
C) a procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order 
D) an organizational plan and all the related measures adopted by an entity to safeguard assets,encourage employees to follow company policies,promote operational efficiency,and ensure accurate and reliable accounting records

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A company received a bank statement with a balance of $6,000.Reconciling items included a bookkeeper error of $300-a $300 check recorded as $800-two outstanding checks totaling $840,a service charge of $21,a deposit in transit of $250,and interest revenue of $19.What is the adjusted bank balance?

Accepted Answer

A) $4,950 
B) $5,110 
C) $4,608 
D) $5,410 
A) $4,950 
B) $5,110 
C) $4,608 
D) $5,410

Question 11

Reducing expenses to increase operating profit is representative of ________.

Accepted Answer

A) safeguarding assets 
B) following company policies 
C) promoting operational efficiency 
D) ensuring accurate,reliable accounting records 
A) safeguarding assets 
B) following company policies 
C) promoting operational efficiency 
D) ensuring accurate,reliable accounting records

Question 12

The controller at Horizon,Inc.needs new computers for the accounting department.However,there are no guidelines specifying whether the controller can approve purchases of office equipment.
In the above situation,which internal control procedure needs strengthening?

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 13

In reconciling a bank statement,the bank balance is $2,100,and the checkbook balance is $2,001.Which of the following is the most probable reason for the bank balance being larger than the book balance?

Accepted Answer

A) There are outstanding checks. 
B) The bank has deducted certain amounts for bank service charges. 
C) A deposit in transit was made at the end of the month. 
D) The company erroneously recorded a check for an amount less than the actual amount. 
A) There are outstanding checks. 
B) The bank has deducted certain amounts for bank service charges. 
C) A deposit in transit was made at the end of the month. 
D) The company erroneously recorded a check for an amount less than the actual amount.

Question 14

Which of the following components of internal control consists 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 15

As proof of the deposit transaction,a customer receives a cancelled check from the bank.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Internal auditors are employees of the business who ensure that employees are following company policies and that operations are running efficiently.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts over the counter?

Accepted Answer

A) A receipt is issued for each transaction to ensure that each sale is recorded. 
B) At the end of the day,the sales clerk proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
C) The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue. 
D) The store clerk deposits the cash in the bank. 
A) A receipt is issued for each transaction to ensure that each sale is recorded. 
B) At the end of the day,the sales clerk proves the cash by comparing the cash in the drawer against the machine's record of cash sales. 
C) The sales clerk uses the machine tape to record the journal entry for cash receipts and sales revenue. 
D) The store clerk deposits the cash in the bank.

Question 19

Which of the following is true of internal control?

Accepted Answer

A) A company's outside auditor is responsible for the company's internal control system. 
B) One of the major purposes of internal control is to ensure that the assets are safeguarded. 
C) Internal control procedures tend to diminish the importance of operational efficiency. 
D) Internal controls are only necessary for public companies. 
A) A company's outside auditor is responsible for the company's internal control system. 
B) One of the major purposes of internal control is to ensure that the assets are safeguarded. 
C) Internal control procedures tend to diminish the importance of operational efficiency. 
D) Internal controls are only necessary for public companies.

Question 20

Which is the most liquid form of asset?

Accepted Answer

A) cash 
B) accounts receivable 
C) inventory 
D) supplies 
A) cash 
B) accounts receivable 
C) inventory 
D) supplies

Exam 8: Internal Control and Cash

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

A petty cash fund was established with a $250 balance.It currently has cash of $40 and petty cash tickets as follows: Office expense $150 and Entertainment Expense $75.Which of the following would be included in the journal entry to replenish the Petty Cash fund?

Which of the following would be included in the entry to record the replenishment of a petty cash fund?

A cash equivalent is a highly liquid investment that can be converted into cash in three years or less.

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

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

Evaluated Receipts Settlement is ________.

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

A company received a bank statement with a balance of $6,000.Reconciling items included a bookkeeper error of $300-a $300 check recorded as $800-two outstanding checks totaling $840,a service charge of $21,a deposit in transit of $250,and interest revenue of $19.What is the adjusted bank balance?

Reducing expenses to increase operating profit is representative of ________.

The controller at Horizon,Inc.needs new computers for the accounting department.However,there are no guidelines specifying whether the controller can approve purchases of office equipment. In the above situation,which internal control procedure needs strengthening?

In reconciling a bank statement,the bank balance is $2,100,and the checkbook balance is $2,001.Which of the following is the most probable reason for the bank balance being larger than the book balance?

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

As proof of the deposit transaction,a customer receives a cancelled check from the bank.

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

Internal auditors are employees of the business who ensure that employees are following company policies and that operations are running efficiently.

Which of the following is a measure for discouraging theft for a retail store that accepts cash receipts over the counter?

Which of the following is true of internal control?

Which is the most liquid form of asset?

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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