Deck 7: Internal Control and Cash

Question 1

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.

Answer 1

B

Question 2

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 $\quad$$\quad$$\quad$ Cr Cash
B) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Other revenue
C) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Accounts payable
D) Dr Accounts payable $\quad$$\quad$ Cr Cash

Answer 2

Dr Bank charges $\quad$$\quad$$\quad$ Cr Cash

Question 3

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.

Answer 3

D

Question 4

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.

Question 5

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 6

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 7

Included in the bank statement was a credit received from a customer to settle their account.What entry is required in the company's accounts?

A) Dr Cash $\quad$$\quad$$\quad$ Cr Accounts receivable
B) Dr Cash $\quad$$\quad$$\quad$ Cr Sales
C) Dr Accounts receivable $\quad$ Cr Cash
D) Dr Sales $\quad$$\quad$$\quad$ Cr Cash

Question 8

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 9

Indicate which of the features of an effective internal control system are involved in the practices set out in the following question: Segregation of duties involve:

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

Question 10

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 11

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 12

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 13

Included in the bank statement was a debit for the current month's electricity usage.What entry is required in the company's accounts?

A) Dr Electricity expense $\quad$$\quad$$\quad$ Cr Cash
B) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Electricity revenue
C) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Electricity expense
D) Dr Accounts payable $\quad$$\quad$$\quad$$\quad$ Cr Cash

Question 14

Indicate which of the features of an effective internal control system are involved in the practices set out in the following question: 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.

Question 15

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 16

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 17

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

A) Dr Other revenue $\quad$$\quad$$\quad$ Cr Cash
B) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Other revenue
C) Dr Cash $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Cr Accounts receivable
D) Dr Accounts receivable $\quad$$\quad$ Cr Cash

Question 18

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 19

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 20

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 21

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 22

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 $\quad$$\quad$ Cr Cash$750
B) Dr Accounts receivable$750 $\quad$$\quad$ Cr Inventory$750
C) Dr Accounts payable$750 $\quad$$\quad$$\quad$ Cr Cash$750
D) Cr Accounts receivable$750 $\quad$$\quad$ Dr Cash$750

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

Simon Ltd's bank statement showed a credit balance of $14 000 at 31 October.It also showed bank service charges of $2200 and a direct credit received from a customer amounting to $600.Unpresented cheques were $1400 and there was an outstanding deposit for $4600.

- What was the bank balance in Simon Ltd's books at 31 October before the adjustments?

A) $15600 Dr
B) $15800 Cr
C) $17200 Cr
D) $18800 Dr

Question 25

On 30 June,the petty cash fund of Charles Ltd was replenished when the count of petty cash on hand totalled $60.Vouchers revealed that postage expenses of $40 had been incurred.The journal entry to record replenishment was:

A) Dr Postage expense$40 $\quad$$\quad$ Cr Cash$40
B) Dr Postage expense$40 $\quad$$\quad$ CrPetty cash$40
C) Dr Petty cash$40 $\quad$$\quad$$\quad$$\quad$ Cr Cash$40
D) none of the answers provided.

Question 26

Alison Ltd's bank statement showed a debit balance of $7000 at 31 December.It also showed bank service charges of $1100 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 $2300.

-What was the bank balance in Alison Ltd's books at 31 December before the adjustments?

A) $7800 Dr
B) $7900 Cr
C) $8600 Dr
D) $9400 Cr

Question 27

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 28

Tell Ltd's bank statement showed a credit balance of $7000 at 30 November.It also showed bank service charges of $1100 and the collection of a note for the company amounting to $300.Unpresented cheques were $700 and there was an outstanding deposit for $2300.

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

A) $7800 Dr
B) $7900 Cr
C) $8600 Cr
D) $9400 Dr

Question 29

Alison Ltd's bank statement showed a debit balance of $7000 at 31 December.It also showed bank service charges of $1100 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 $2300

-What was the final bank balance in Alison Ltd's ledger at 31 December?

A) $5400 Dr
B) $5400 Cr
C) $8600 Dr
D) $8600 Cr

Question 30

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 31

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 32

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 33

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 34

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 35

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 36

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 $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 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 $9400.

Question 37

Simon Ltd's bank statement showed a credit balance of $14 000 at 31 October.It also showed bank service charges of $2200 and a direct credit received from a customer amounting to $600.Unpresented cheques were $1400 and there was an outstanding deposit for $4600.

-What was the final bank balance in Simon Ltd's ledger at 31 October?

A) $10800 Dr
B) $10800 Cr
C) $17200 Dr
D) $17200 Cr

Question 38

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 39

Tell Ltd's bank statement showed a credit balance of $7000 at 30 November.It also showed bank service charges of $1100 and the collection of a note for the company amounting to $300.Unpresented cheques were $700 and there was an outstanding deposit for $2300.

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

A) $5400 Dr
B) $5400 Cr
C) $8600 Dr
D) $8600 Cr