Financial Accounting Chapter 7 Exercise

An adjusting entry is required for all of the following except A. collection of note by bank B. bank service charge C. bank errors D. NSF checks

On a bank reconciliation, outstanding checks are added to the balance per books to obtain the adjusted balance per books. True False

The three main factors (the fraud triangle) that contribute to fraudulent activity are: Opportunity, Financial Pressure and Rationalization. True False

Cash is generally listed last in the current asset section of the balance sheet. True False

Which of the following would be added to the balance per bank on a bank reconciliation? A. Deposits in transit. B. Outstanding checks. C. NSF check. D. Service charge

Which of the following statements concerning the limitations of internal control is correct? A. The costs of establishing control procedures should not exceed their expected benefit. B. Collusion among employees may result in more effective control. C. The human factor is unimportant. D. A system of internal control should be infallible (unfailing).

If a check correctly written and paid by the bank for $438 is incorrectly recorded on the company's books for $483, the appropriate treatment on the bank reconciliation would be A. deduct $438 from the book's balance. B. add $45 to the bank's balance. C. deduct $45 from the bank's balance. D. add $45 to the book's balance.

Which of the following statements concerning the limitations of internal control is correct? A. Collusion among employees may result in more effective control. B. A system of internal control should be infallible (unfailing). C. The costs of establishing control procedures should not exceed their expected benefit. D. The human factor is unimportant.

Internal control is most effective when only one person is responsible for a given task. True False

Which of the following would be added to the balance per bank on a bank reconciliation? A. Outstanding checks. B. Deposits in transit. C. NSF check. D. Service charge.

Internal auditors are specialists hired from other companies to evaluate the effectiveness of the company's system of internal control. True False

From an internal control standpoint, the asset most susceptible to improper diversion and use is land buildings prepaid insurance cash

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: A. debit Miscellaneous Expense, credit Account Receivable B. debit Cash, credit Accounts Receivable C. debit Accounts Payable, credit Cash D. debit Accounts Receivable, credit Cash

When two or more people get together for the purpose of circumventing prescribed controls, it is called A. bonding of employees B. collusion C. a fraud committee D. a division of duties

The human element is an important factor in every system of internal control. True False

Grant Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, July 31 $3,500 Deposits in transit 150 Notes receivable and interest collected by bank 850 Bank charge for check printing 20 Outstanding checks 2,000 NSF check 170 The adjusted cash balance per books on July 31 is A. $4,160 B. $4,010 C. $2,310 D. $2,460

Which of the following would be deducted from the balance per bank on a bank reconciliation? A. Outstanding checks. B. Service charge. C. Deposits in transit. D. Electronic funds transfer to supplier.

Allowing only designated personnel to handle cash receipts is an example of A. establishment of responsibility B. documentation procedures C. segregation of duties D. independent internal verification

From an internal control standpoint, the asset most susceptible to improper diversion and use is prepaid insurance buildings cash land

An adjusting entry is required for all of the following except A. bank errors B. bank service charge C. collection of note by bank D. NSF checks

Which of the following would be added to the balance per books on a bank reconciliation? NSF check Collection of note by bank Outstanding checks Deposits in transit