Deck 4: Accrual Accounting Concepts

Question 1

The objectives of internal control are to:

A) prevent unintentional errors and irregularities.
B) safeguard assets and enhance the accuracy and reliability of the accounting records.
C) enhance the accuracy and reliability of financial statements.
D) safeguard assets and prevent thefts.

Answer 1

B

Question 2

Texter Company has a balance of $65,000 in Accounts Receivable and a $5,000 credit balance in Allowance for Doubtful Accounts. If a specific customer's account with a balance of $500 is written off as uncollectible, the cash (or net) realizable value of the accounts receivable will be:

A) $64,500.
B) $60,000.
C) $65,500.
D) $60,500.

Answer 2

B

Question 3

Companies that fail to maintain an adequate system of internal control:

A) may be subject to charges of fraud.
B) will be automatically dissolved.
C) may be subject to fines and officer imprisonment.
D) may be forced to sell their assets.

Answer 3

C

Question 4

Allowance for Doubtful Accounts is presented as a(n):

A) addition to Accounts Receivable on the balance sheet.
B) operating expense on the income statement.
C) deduction from Sales on the income statement.
D) contra asset on the balance sheet.

Question 5

The bank statement that a depositor receives from the bank includes:

A) notification of amounts deducted by the bank to cover such things as the cost of a supply of new checks ordered by the depositor.
B) a designation of which checks are still outstanding at the end of the month.
C) a designation of which deposits are in transit at the end of the month.
D) notification of errors made by the depositor in recording checks written during the month in the depositor's accounts.

Question 6

Lack of agreement between the cash balance per bank and the cash balance per books is due to:

A) errors and poor internal control.
B) errors and bank memoranda.
C) time lags.
D) time lags and errors.

Question 7

The three primary accounting issues associated with accounts receivable are:

A) valuation, disposing, and statement presentation.
B) recognition, valuation, and statement presentation.
C) revenue recognition, matching, and statement presentation.
D) recognition, valuation, and disposing.

Question 8

Which of the following is not a limitation of internal control?

A) Cost of establishing control procedures should not exceed their benefit.
B) The human element.
C) Collusion.
D) The size of the company.

Question 9

Which one of the following sections would not appear on a cash budget?

A) Investing.
B) Financing needed.
C) Cash receipts.
D) Cash disbursements.

Question 10

Which of the following methods and bases of accounting for uncollectible accounts receivable is inconsistent with the proper application of matching?

A) Direct write-off method.
B) Aging of receivables allowance method.
C) Percentage of receivables basis.
D) None of the above.