Deck 8: Internal Control and Cash

Question 1

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 enterprise
D) prevents collusion between employees.

Answer 1

D

Question 2

Accompanying the bank statement was a debit memorandum for an NSF (not sufficient funds)cheque 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

Answer 2

D

Question 3

The practice of issuing identification cards to employees ensures:

A) clear establishment of responsibility lines
B) maintenance of effective records
C) separation of record-keeping from handling assets
D) physical protection of sensitive assets.

Answer 3

D

Question 4

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a cheque outstanding at end of month,$450,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 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 6

Which of the following statements about the bank statement is NOT true?

A) The bank statement shows the amount payable by the customer.
B) The bank statement summarises the activity in a cheque account.
C) If the customer of the bank has a substantial bank overdraft,the closing balance will normally be a debit.
D) It is the source document for bank charges.

Question 7

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) All errors and irregularities should be eliminated.
D) A sound system of internal control is fundamental to the production of reliable financial reports.

Question 8

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a customer's note receivable for $1500 plus $50 interest collected by bank and 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 9

Segregation of duties involves:

A) clearly establishing responsibility lines
B) maintaining effective records
C) separating record-keeping from handling of assets
D) physically protecting sensitive assets.

Question 10

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a customer's cheque for $85 that was returned because of insufficient funds 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 11

The statement that compares the balance as shown in the bank's records with the balance in the cash at bank account at a particular date is known as the:

A) bank statement
B) bank reconciliation statement
C) bank control account
D) cash flow statement.

Question 12

Segregation of duties involves:

A) ensuring that only qualified accountants are employed in the accounting department
B) separation of record-keeping from handling of assets
C) providing each staff member with an individual password
D) separating the tasks of employees.

Question 13

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for interest earned on account,$240,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 14

Which of the following is NOT a feature of the internal control of cash payments?

A) Two staff members should sign the cheques.
B) The signatories should be involved in invoice approval.
C) Payments should only be made for properly authorised documentation.
D) Cheques should be endorsed with a stamp.

Question 15

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a deposit for $2300 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.

Question 16

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

A) More than one person opens mail.
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 17

Accompanying the bank statement was a debit memorandum 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

Question 18

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for a cheque for $952 in payment of a supplier's account that was erroneously entered as $592 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 19

Which of the following is NOT a benefit to be derived from an efficient system of internal control?

A) Assets are protected against damage or loss.
B) Defalcations are completely eliminated.
C) The conduct of the business is more orderly.
D) Errors are identified and corrected on a timely basis.

Question 20

Which of the following is NOT a way that management can establish proper control over the enterprise'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 21

Which of the following items would require a journal entry following preparation of the bank reconciliation statement?

A) error by the bank
B) error by the company
C) unpresented cheques at end of the month
D) receipts not yet banked.

Question 22

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for $650 that a customer 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 23

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for monthly service charge appearing on the bank statement,$45,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 24

In preparing the monthly bank reconciliation,Jon Ltd ascertains that there is a note collected by the bank for $500 and an interest on overdraft charge of $760.Outstanding cheques total $9400 and there is a deposit in transit for $2900.It will be necessary to make journal entries for:

A) the outstanding cheques of $9400 and the deposit in transit of $2900
B) the note collected for $500 and the interest charge of $760
C) only the interest on overdraft charge of $760
D) the note collected for $500,the interest charge of $760 and outstanding cheques of $9400.

Question 25

In preparing the monthly bank reconciliation,Fur Ltd ascertains that there is a $750 cheque from Hunt Traders for merchandise that is marked NSF.The journal entry to record this in Fur Ltd's books is:

A) DR Accounts receivable
$750
CR Cash
$750
B) DR Accounts receivable
$750
CR Inventory
$750
C) DR Accounts payable
$750
CR Cash
$750
D) CR Accounts receivable
$750
DR Cash
$750

Question 26

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for dividend on shares,$1200,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 27

For which of the following adjustments would NO journal entry be required following completion of the bank reconciliation?

A) error by the bank
B) error by the company
C) note collected by the bank
D) NSF cheque.

Question 28

In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for cheques unpresented at end of month,$4900,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 29

Which of the following is NOT a common feature of a petty cash system?

A) Cash in the fund plus vouchers held equals the amount advanced to the petty cashier.
B) When the fund is replenished,the expenses account is debited.
C) When the fund is replenished,the cash account is credited.
D) When the fund is replenished,petty cash is credited.

Question 30

The debit recorded in the journal to reimburse the petty cash fund is to:

A) petty cash
B) accounts receivable
C) cash
D) various accounts for which the petty cash was disbursed.

Question 31

What was the bank balance in Tell Ltd's books at 30 November 2012 before the adjustments?

A) $7800 DR
B) $7900 CR
C) $8600 CR
D) $9400 DR.

Question 32

What was the final bank balance in Tell Ltd's ledger at 30 November 2012?

A) $5400 DR
B) $5400 CR
C) $8600 DR
D) $8600 CR.