Deck 7: Internal Control and Cash

Question 1

Included in the bank statement was a debit for bank service charges. What entry is required in the company's accounts?

A) DR Bank charges
CR Cash
B) DR Cash
CR Other revenue
C) DR Cash
CR Accounts payable
D) DR Accounts payable
CR Cash

Answer 1

A

Question 2

Simon Ltd's bank statement showed a credit balance of $14 000 at 31 October. It also showed bank service charges of $2 200 and a direct credit received from a customer amounting to $600. Unpresented cheques were $1 400 and there was an outstanding deposit for $4 600. What was the final bank balance in Simon Ltd's ledger at 31 October?

A) $10 800 DR
B) $10 800 CR
C) $17 200 DR
D) $17 200 CR

Answer 2

C

Question 3

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for a deposit for $2 300 not appearing on the bank statement is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Answer 3

A

Question 4

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for a $450 cheque outstanding at end of month is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 5

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for a $8 100 dividend on shares, deposited directly into the bank account, appearing on the bank statement is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 6

Tell Ltd's bank statement showed a credit balance of $7 000 at 30 November. It also showed bank service charges of $1 100 and the collection of a note for the company amounting to $300. Unpresented cheques were $700 and there was an outstanding deposit for $2 300. What was the bank balance in Tell Ltd's books at 30 November before the adjustments?

A) $7 800 DR
B) $7 900 CR
C) $8 600 CR
D) $9 400 DR

Question 7

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for $870 from a debtor paid directly into the company's bank account is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 8

Which of the following is NOT a significant feature of a system of internal control over cash?

A) Two staff members should sign cheques.
B) The person who does bank reconciliations should not be the cashier.
C) The staff member responsible for approving invoices for payment should sign cheques.
D) Bank reconciliation statements are prepared at regular intervals.

Question 9

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for a cheque for $871 in payment of an account payable that was erroneously entered as $817 in the company's books is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 10

In preparing the monthly bank reconciliation, Jon Ltd ascertains that there is a direct credit from a customer for $500 and an interest on overdraft charge of $760. Outstanding cheques total $9 400 and there is a deposit in transit for $2 900. It will be necessary to make journal entries for:

A) the outstanding cheques of $9 400 and the deposit in transit of $2 900.
B) the direct credit for $500 and the interest charge of $760.
C) only the interest on overdraft charge of $760.
D) the direct credit for $500, the interest charge of $760 and outstanding cheques of $9 400.

Question 11

Included in the bank statement was a debit for an NSF (not sufficient funds) payment received from a customer. What entry is required in the company's accounts?

A) DR Other revenue
CR Cash
B) DR Cash
CR Other revenue
C) DR Cash
CR Accounts receivable
D) DR Accounts receivable
CR Cash

Question 12

Which of the following is NOT a way that management can establish effective control over the company's affairs?

A) There is a rotation of employees over a range of jobs.
B) Record-keeping is combined with handling of assets.
C) Insurance is carried on assets.
D) Staff are required to take annual leave.

Question 13

Segregation of duties involves:

A) clearly establishing lines of responsibility.
B) separation of record-keeping from handling of assets.
C) providing each staff member with an unique password.
D) requiring employees to take holidays each year.

Question 14

Which of the following is NOT correct? An effective internal control system for any organisation is one that:

A) discourages inefficient use of resources.
B) helps management safeguard assets.
C) assists management in controlling the company.
D) ensures all errors and irregularities are eliminated.

Question 15

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for $240 in interest earned on the account is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 16

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for monthly bank service charges, $30, appearing on the bank statement is to:

A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.

Question 17

In terms of an effective internal control system, the practice of issuing identification cards to employees assists:

A) clear establishment of responsibility lines.
B) maintenance of effective records.
C) separation of duties.
D) physical protection of sensitive assets.

Question 18

Alison Ltd's bank statement showed a debit balance of $7 000 at 31 December. It also showed bank service charges of $1 100 and a direct credit received from a customer for the company amounting to $300. Unpresented cheques were $700 and there was an outstanding deposit for $2 300. What was the bank balance in Alison Ltd's books at 31 December before the adjustments?

A) $4 600 DR
B) $6 200 CR
C) $7 800 CR
D) $9 400 DR

Question 19

Which of the following is NOT true of a sound system of internal control?

A) Implementation of controls involves costs.
B) A sound system of internal control is the responsibility of management.
C) Through it, errors and irregularities will be eliminated.
D) It prevents collusion between employees.