Deck 5: Accounting Systems and Internal Control

Question 1

The move to e-commerce has created new and varied difficulties in the area of internal control.

Answer 1

True

Question 2

Define segregation of duties and explain how it benefits internal control.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Answer 2

Segregation of duties is an internal control procedure in which no one person is responsible for all of the records and documents for an activity. An example would be that one person should not prepare the purchase order, verify the receipt of the merchandise, prepare the invoice and receive the payment for an order. By separating these responsibilities, the opportunity for fraud or theft is minimised. Segregation of duties also makes it less likely that an error will go undetected. This is the purpose of internal control policies and procedures.

Question 3

The records for all accounts are kept in a single, large book called the ledger.

Answer 3

False

Question 4

Which of the following is not an advantage of using subsidiary records?

A)The actual posting can be done later by a different person.
B)Every transaction will be recorded prior to being entered into the ledger.
C)They can only be used in computerised accounting systems.
D)Totals can be posted when it is appropriate to do so.

Question 5

An organisation determines that any check for an amount greater than $5 000 must require approval from the controller. This is an example of:

A)segregation of duties.
B)approval authority.
C)rotating key jobs.
D)reconciling the bank statement.

Question 6

Which of the following is not a component of internal control in financial areas?

A)Approval authority
B)Good records maintenance
C)Consolidation of duties
D)Safeguards

Question 7

A sales book is used to record sales returns.

Question 8

In a cash payments journal, the total column would be:

A)credited to the cash account.
B)credited to the purchases account.
C)debited to the sales account.
D)credited to the sales returns account

Question 9

Subsidiary records are not part of the double-entry accounting system.

Question 10

Which of the following is a subsidiary record?

A)Two-column cash book
B)Three-column cash book
C)A cash account in a separate ledger
D)A cash journal

Question 11

The Ledger column is a purchases book is used:

A)to record the amount to be debited to the purchases account.
B)to record the amount to be credited to the purchase account.
C)to record items that don't fit under any of the main headings in the book.
D)to record purchase returns.

Question 12

Enter the following transactions into a purchases book:
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_____________________________________________________________________________________________

Question 13

Like the trial balance, internal control procedures can identify or prevent all errors before they are carried forward to the financial statements.

Question 14

Which of the following is not a name used to describe the subsidiary record in which credit transactions are usually first recorded?

A)Journal
B)Book of original entry
C)Ledger
D)Day book

Question 15

In which ledger would you find a list of debtors and the amount owed by each?

A)Purchases ledger
B)General ledger
C)Sales ledger
D)Cash ledger

Question 16

Determining the difference between the balance on the bank statement and the balance in the cash account is:

A)reconciling the bank statement.
B)auditing the cash account.
C)preparing the trial balance.
D)running a spot check.

Question 17

Which of the following would not be included in a good recording system?

A)A well thought out chart of accounts
B)A method of cross-referencing transactions
C)The elimination of subsidiary records
D)A well-developed system of ledger accounts

Question 18

Which of the following businesses would be most likely use sales and purchases books?

A)A hardware store
B)A real estate agent
C)A physician
D)A hair salon

Question 19

The ledger containing revenue and expense accounts is the:

A)nominal ledger.
B)general ledger.
C)sales ledger.
D)purchases ledger.

Question 20

Using a bar coding system to track equipment and other non-current assets is an example of:

A)segregation of duties.
B)physical audits.
C)reconciliations.
D)appropriate control over assets.

Question 21

The columns to the right of the total in a petty cash book represent:

A)all of the company's expense accounts.
B)the accounts for which petty cash was spent.
C)the amounts of petty cash spent.
D)the balances in the petty cash account.

Question 22

Which of the following is true concerning bank reconciliations?

A)The decline in the use of cheques will ultimately result in bank reconciliations no longer being needed.
B)Bank reconciliations are among the most difficult of accounting procedures.
C)Bank reconciliations confirm the accuracy of the cash balance on a particular date.
D)Bank reconciliations are done annually along with the closing off process.

Question 23

The bank statement arrives and shows a balance of $2 468. The cash account balance is $3 128. In reconciling the bank statement, which of the following would require a deduction from the cash account balance?

A)Unpresented cheques totalling $ 357.00.
B)A dishonoured cheque in the amount of $150.
C)A deposit made on the day of the statement which does not appear on the statement in the amount of $319.
D)Interest received on the account of $35.

Question 24

It's time to reconcile petty cash. Vouchers indicate that the following amounts have been used:
Purchase of toner for copy machine for $60 on August 1
Purchase of postage for $25 on August 7
Purchase of petrol for the company truck for $125 on August 14
Purchase of lunch for employee training for $78.90 on August 21
Cost to send an overnight cheque to a vendor of $15.75 on August 28
August began with a balance of $150 in petty cash and fund was replenished with an additional $350 on August 1. Complete the petty cash book for August.

Question 25

While, in practice, most transactions are recorded in a subsidiary record, any transaction could be posted in the general journal.

Question 26

Cloud computing:

A)can be expensive because of frequent version updating requirements.
B)utilises an online server instead of a physical computer for data storage.
C)eliminates privacy and legal concerns.
D)does not eliminate the need for redundant bookkeeping.

Question 27

The difference between a cash book and a cash journal is that the cash book allows for the use of analysis columns.

Question 28

Which of the following would not be a prime document for the cash receipts journal?

A)Invoices
B)Receipts
C)Bank statements
D)Credit card receipt summaries

Question 29

The owner of a business withdraws $100 from the ATM and neglects to let anyone know so that the transaction can be recorded. This results in an error of commission and does not affect the agreement of the trial balance.

Question 30

The bank statement arrives and shows a balance of $2 468. The cash account balance is $3 128. In reconciling the bank statement, which of the following would require an addition to the cash account balance?

A)Unpresented cheques totalling $ 357.00.
B)A dishonoured cheque in the amount of $150.
C)A deposit made on the day of the statement which does not appear on the statement in the amount of $319.
D)Interest received on the account of $35.

Question 31

With a computerised accounting system, there is no need for:

A)internal controls.
B)checks and balances.
C)updating each subsystem manually.
D)data backups.

Question 32

Which of the following is not an advantage of using a control account?

A)A control account provides a check and balance on the postings from the subsidiary records.
B)A control account contributes to internal control by allowing a different person to keep the control account than the person making the more detailed posting.
C)Balances from the control account are readily available.
D)Agreement between the control account and the ledger account guarantees accuracy in the ledger account.

Question 33

When petty cash is replenished, the transaction to replenish it includes:

A)a debit to petty cash.
B)a credit to petty cash.
C)a debit to cash.
D)a credit to cash.

Question 34

A furniture company purchases a new milling machine costing $350 000 on account. Which of the following statements is true?

A)This transaction would be recorded in the purchases book and would include a credit to Cash.
B)This transaction would be recorded in the cash payments book and would include a debit to Purchases.
C)This transaction would be recorded in the general journal and would include a credit to Payables/Creditors.
D)This transaction would be recorded in the general journal and would include a credit to Equipment.

Question 35

The control account for receivables has a balance of $150 000. The receivables ledger account has a debit balance of $150 000. This agreement shows that the account is error free.

Question 36

Which of the following is a disadvantage of using the general journal for recording transactions?

A)Using the general journal provides no grouping of transactions by type.
B)Using the general journal lessens the risk of omission of entries.
C)Using the general journal provides more details on each transaction.
D)Using the general journal makes fraud easier to discover.

Question 37

Disagreement between the bank statement balance and the cash account balance indicates one of more errors in the cash account.

Question 38

Which of the following is true of a computerised accounting system?

A)Card files are used for employees, creditors and debtors.
B)A coding system is used which does not require linkage to the chart of accounts.
C)A computerised accounting system eliminates the need for internal controls.
D)Because a computerised accounting system updates automatically, the files do not need to be backed up.

Question 39

C. Palmer opens a new computer sales and repair business. His assets are: Premises $700 000, Equipment $100 000, Inventory $150 000, and Cash $30 000. His liabilities are: Payables - M Rice $25 000. The journal entry to record the opening would include:

A)a credit to Capital for $955 000.
B)a debit to Capital for $955 000.
C)a credit to Capital for $1 050 000.
D)a debit to Capital for $1 050 000.