Question 1

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

Accepted Answer

A)   discourages inefficient use of resources.
B)   helps management safeguard assets.
C)   assists management in controlling the enterprise.
D)   prevents collusion between employees. D

Question 2

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?

Accepted Answer

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

Question 3

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?

Accepted Answer

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

Question 4

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:

Accepted Answer

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

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

Accepted Answer

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

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:

Accepted Answer

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

Question 7

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:

Accepted Answer

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

Question 8

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:

Accepted Answer

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

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

Accepted Answer

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 10

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:

Accepted Answer

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

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

Accepted Answer

A)   Error by the bank
B)   Error by the company
C)   Note collected by the bank
D)   NSF cheque

Question 12

Segregation of duties involves:

Accepted Answer

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

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?

Accepted Answer

A)   Dr Other revenueCr Cash
B)   Dr CashCr Other revenue
C)   Dr CashCr Accounts receivable
D)   Dr Accounts receivableCr Cash

Question 14

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:

Accepted Answer

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 15

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

Accepted Answer

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 16

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:

Accepted Answer

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

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?

Accepted Answer

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

Question 18

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

Accepted Answer

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 19

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

Accepted Answer

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 20

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:

Accepted Answer

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.

Exam 7: Internal Control and Cash

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

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:

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

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:

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:

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:

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

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:

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

Segregation of duties involves:

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?

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:

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

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:

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

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

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: