Exam 6: Internal Control and Accounting for Cash

While preparing its bank reconciliation,Maynard Company determined that its bank had collected a $650 account receivable for the company and deducted a $25 collection fee.Which of the following shows the effect of this transaction on the financial statements?

After the adjustments identified on the bank reconciliation have been recorded,the ending cash (book)balance reflected in the company's records will equal the true cash balance.

Rainey Company's true cash balance at October 31 is $5,710.The following information is available for the bank reconciliation: Outstanding checks,$600 Deposits in transit,$450 Bank service charges,$90 The bank had collected an account receivable for Rainey Company,$1,000 The bank statement included an NSF check written by one of Ramsey's customers for $600. What was the unadjusted book balance at October 31?

A review of the bank statement and accounting records of Blake Company revealed the following items: -Which of the following describes an activity that increases a company's bank account balance?

What is an outstanding check?

A savings account or certificate of deposit that imposes a substantial penalty for early withdrawals should not be classified as Cash on the balance sheet.

To ensure proper segregation of duties,after the check is signed,an employee should record the check in the accounting records and review the appropriate supporting documents.

The true cash balance can only be determined if both the unadjusted bank balance and the unadjusted book balance are known.

Which of the following is not an example of a common control activity?

Even a good system of internal controls can be circumvented by collusion among employees.

Following the February bank reconciliation,the accountant made the following entry in the journal of Kincaid Company: Which of the following is a possible explanation for this journal entry?

The accountant for Ye Olde Bookstore balanced out the cash register for the day.The company began the day with $125 and ended the day with $1,150.25 in the cash drawer.That day's cash register tape shows $1,031.50 in cash sales.What is the effect on the financial statements of the entry to record the day's sales and any related overage or shortage?

Which of the following statements accurately describes a fidelity bond?

At the time petty cash funds are disbursed,a journal entry should be made,debiting the appropriate asset or expense account.

On April 30,Midwest Company established a petty cash fund of $1,000.On May 1,a disbursement of $355 was made from the fund for payment of delivery expense.What entry should be made on May 1 to record this disbursement?

Which of the following is not a typical document associated with a bank checking account?

In the reconciliation of the June bank statement,a deposit made on June 30 did not appear on the June bank statement.How is this deposit in transit shown on the bank reconciliation?

A bank reconciliation normally begins with the ending cash balance shown on the bank statement and reconciles it to the unadjusted cash account balance on the company's books.

The purpose of a petty cash fund is to eliminate the need for control over a business's small cash disbursements.

Peterson Company's petty cash fund was established on January 1 with $500.On January 31,a count of the fund revealed: $105 in cash remaining and vouchers for miscellaneous expenses totaling $400.If the entries to record the disbursements and to replenish the fund are combined,what effect will the resulting entry have on the elements of the' financial statements?