Chapter 8 example #84981

An organization uses internal control to enhance the accuracy and reliability of its accounting records and to: A. safeguard its assets. B. prevent fraud. C. produce correct financial statements. D. deter employee dishonesty.

The principles of internal control do not include: A. establishment of responsibility. B. documentation procedures. C. management responsibility. D. independent internal verification.

Physical controls do not include: A. safes and vaults to store cash. B. independent bank reconciliations. C. locked warehouses for inventories. D. bank safety deposit boxes for important papers.

Which of the following items in a cash drawer at November 30 is not cash? A. Money orders. B. Coins and currency. C. A customer check dated December 1. D. A customer check dated November 28.

Permitting only designated personnel to handle cash receipts is an application of the principle of: A. segregation of duties. B. establishment of responsibility. C. independent check. D. other controls.

The use of pre-numbered checks in disbursing cash is an application of the principle of: A. establishment of responsibility. B. segregation of duties. C. physical, mechanical, and electronic controls. D. documentation procedures.

A company writes a check to replenish a $100 petty cash fund when the fund contains receipts of $94 and $3 in cash. In recording the check, the company should: A. debit Cash Short and Over for $3. B. debit Petty Cash for $94. C. credit Cash for $94. D. credit Petty Cash for $3.

The control features of a bank account do not include: A. having bank auditors verify the correctness of the bank balance per books. B. minimizing the amount of cash that must be kept on hand. C. providing a double record of all bank transactions. D. safeguarding cash by using a bank as a depository.

In a bank reconciliation, deposits in transit are: A. deducted from the book balance. B. added to the book balance. C. added to the bank balance. D. deducted from the bank balance.

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: A. outstanding checks. B. deposit in transit. C. a bank error. D. bank service charges.

Which of the following statements correctly describes the reporting of cash? A. Cash cannot be combined with cash equivalents. B. Restricted cash funds may be combined with Cash. C. Cash is listed first in the current assets section. D. Restricted cash funds cannot be reported as a current asset.

Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets and to enhance the accuracy and reliability of its accounting records. A. True B. False

Control is most effective when two people are responsible for a given task. A. True B. False

Few internal control systems provide for independent internal verification. A. True B. False

Cash is the asset most susceptible to improper diversion and use. A. True B. False

Internal control over cash disbursements is more effective when companies pay by check, rather than by cash. A. True B. False

Companies use a petty cash fund to pay relatively small amounts. A. True B. False

There are two parties to a check: the maker and the payee. A. True B. False

A bank issues a debit memorandum when it collects a note receivable for a depositor. A. True B. False

The lack of agreement between the bank balance and the book balance is due to time lags and errors. A. True B. False

A company records each reconciling item used to determine the adjusted cash balance per books. A. True B. False

The principles of internal control include all of the following except: A. establishment of responsibility. B. combining of duties. C. physical, mechanical, and electronic controls. D. independent internal verification.

Controls that relate primarily to the safeguarding of assets are: A. physical controls. B. mechanical controls. C. electronic controls. D. automated controls.

Large companies often assign independent internal verification to the: A. bookkeeper. B. controller. C. internal auditors. D. treasurer.

All of the following are classified as cash except: A. checks. B. money orders. C. money on hand. D. postdated checks

Having different individuals receive cash, record cash receipts, and hold the cash is an example of: A. establishment of responsibility. B. segregation of duties. C. documentation procedures. D. independent internal verification

Using pre-numbered checks and having an approved invoice for each check is an example of: A. establishment of responsibility. B. segregation of duties. C. documentation procedures. D. independent internal verification.

. A disbursement system that uses wire, telephone, or computers to transfer cash balances from one location to another is called a(n): A. automated system. B. electronic funds transfer system. C. internal system. D. voucher system.

Making payments from a petty cash fund requires: A. a credit to Cash. B. a credit to Petty Cash. C. a debit to various expense accounts. D. no accounting entry to record a payment when it is made from petty cash

A company reports a debit balance in Cash Short and Over as a(n): A. liability. B. miscellaneous expense. C. miscellaneous revenue. D. asset.

All of the following would involve a debit memorandum except: A. a bank service charge. B. an NSF check. C. the cost of printing checks. D. interest earned.

On a bank reconciliation, outstanding checks are: A. added to the bank balance. B. deducted from the bank balance. C. added to the book balance. D. deducted from the book balance

On a bank reconciliation, collection of a note receivable by the bank is: A. added to the bank balance. B. deducted from the bank balance. C. added to the book balance. D. deducted from the book balance.

Journal entries are required by the depositor for all of the following except: A. collection of a note receivable. B. an NSF check. C. bank service charges. D. bank errors.

Cash equivalents include all of the following except: A. money market funds. B. bank certificates of deposit. C. U.S. Treasury bills. D. restricted cash.

Which of the following is FALSE about the Sarbanes-Oxley Act of 2002? A. Applies to publicly held companies. B. Will prevent fraud from occurring. C. Emphasizes strong internal control systems as a goal. D. Was motivated by the Enron scandal.

Which of the following is an element of internal control? A. risk assessment B. information and communication C. monitoring D. all of the answers listed

The credit balance in Cash Short and Over at the end of an accounting period is reported as: A. income on the income statement. B. an expense on the income statement. C. an asset on the balance sheet. D. a liability on the balance sheet.

40. Receipts from cash sales of $1,000 were recorded incorrectly in the journal as $10,000. This item would be included on the bank reconciliation as: A. an addition to the balance per depositor's records. B. an addition to the balance per bank statement. C. a deduction from the balance per bank statement. D. a deduction from the balance per depositor's records.

A depositor issued a check for $195 in payment of a voucher that was recorded in the journal as $915. This item would be included on the bank reconciliation as a(n): A. addition to the balance per bank statement. B. addition to the balance per depositor's records. C. deduction from the balance per bank statement. D. deduction from the balance per depositor's records.

A bank makes credit entries into a depositor's account for all of the following EXCEPT: A. deposits made by electronic funds transfer. B. proceeds for a loan made to the company by the bank. C. service charges. D. correction of bank errors.

A bank reconciliation contains all of the following items EXCEPT: A. cash balance according to the bank statement. B. cash balance according to the depositor's records. C. adjusted balance at the end of the month. D. owner's equity balance at the beginning of the month.

All of the following are procedures used in accounting for a petty cash fund EXCEPT: A. each time monies are paid from petty cash, the custodian records the details of the payment on a petty cash receipt form. B. each time monies are paid from petty cash, the custodian requests reimbursement. C. the money obtained from cashing a petty cash check is given to the custodian. D. the custodian is authorized to disburse monies from the petty cash fund.

Which of the following is NOT true regarding the presentation of cash on the balance sheet? A. Cash is the most liquid asset, and it is therefore listed first under the current assets section of the balance sheet. B. Most companies present only a single cash amount on the balance sheet by combining all their bank and cash fund accounts. C. Cash is the most liquid asset, and it is therefore listed first under the property, plant, and equipment section of the balance sheet. D. A company may invest its highly liquid cash in order to earn interest; these investments are called cash equivalents.