AUDIT OF CASH AND CASH EQUIVALENTS Flashcards
A Cash Over and Short account
a. is credited when the petty cash fund proves out over.
b. is credited when the petty cash fund proves out short.
c. is not generally accepted.
d. is a contra account to Cash.
a. is credited when the petty cash fund proves out over.
Bank reconciliation are normally prepared on a monthly basis to identify adjustments needed in the depositor’s records and to identify bank errors. Adjustments on the part of the depositor
should be recorded for
a. Book errors, bank errors, deposits in transit and outstanding checks.
b. Outstanding checks and deposits in transit.
c. All items except bank errors, outstanding checks and deposits in transit.
d. Bank errors, outstanding checks and deposits in transit.
c. All items except bank errors, outstanding checks and deposits in transit.
The reconciling item that the auditor would verify to be deposited in the cut-off bank statement
is the?
a. Erroneous bank credit
b. Bank service charge
c. Note collected by bank
d. Deposit in transit
d. Deposit in transit
A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and
a. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
b. is acceptable as a means to pay current liabilities.
c. has a current market value that is greater than its original cost.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.
If the cash balance shown in the company’s cash records is less than the correct cash balance and neither the company nor the bank has made any errors, there must be
a. bank charges not yet recorded by the depositor.
b. an interest credited by the bank in the depositor’s account.
c. a no-sufficient fund check returned by the bank.
d. outstanding checks.
b. an interest credited by the bank in the depositor’s account.
What happens when a petty cash is in use?
a. Petty cash is debited when the fund is replenished.
b. Most small amounts are paid from cash receipts before they are deposited.
c. Expenses paid with petty cash are recorded when the fund is replenished.
d. Petty cash is credited when the fund is replenished.
c. Expenses paid with petty cash are recorded when the fund is replenished.
What is a compensating balance?
a. Temporary investments serving as collateral for outstanding loans
b. b. Margin accounts held with brokers
c. Minimum deposits required to be maintained in connection with a borrowing arrangement
d. Savings account balances
c. Minimum deposits required to be maintained in connection with a borrowing arrangement
What is the major purpose of an imprest petty cash fund?
a. To determine the honesty of the petty cashier.
b. To effectively control cash disbursements.
c. To ease the payment of cash to vendors.
d. To effectively plan cash inflows and outflows.
b. To effectively control cash disbursements.
Which of the following scenarios imply good internal control for cash?
a. The cashier has access to cash receipts journal.
b. All disbursements are supported by approved vouchers and recorded in the check register or cash disbursement journal.
c. Daily receipts await 3 days in the company’s possession before being deposited in the bank.
d. Audit procedures, dates of conducting audit, department involved and scope of audit are
announced to the cashier.
b. All disbursements are supported by approved vouchers and recorded in the check register or cash disbursement journal.
A bank reconciliation is
a. A schedule that accounts for the difference between an entity’s cash balance as shown in the bank statement and the cash balance shown in the general ledger.
b. A merger of two banks that previously were competitors.
c. A formal financial statement that lists all of the bank account balances of an entity.
d. A statement sent by the bank to depositor on a monthly basis.
a. A schedule that accounts for the difference between an entity’s cash balance as shown in the bank statement and the cash balance shown in the general ledger.
Debit memos refer to items not representing checks paid by the bank which are charged or debited by the bank to the account of the depositor but not yet recorded by the depositor as cash disbursements. The following are examples of debit memos, except
a. bank service charges.
b. note collected by bank in favor of the depositor.
c. automatic charge for interest on loan of the depositor.
d. NSF or DAUD checks.
b. note collected by bank in favor of the depositor.
Bank statements provide information about all of the following, except
a. checks cleared during the period.
b. no sufficient funds checks.
c. errors made by the company.
d. bank changes for the period.
c. errors made by the company.
An erroneous bank charge is an?
a. Overstatement in bank disbursement
b. Understatement in bank receipts
c. Understatement in bank disbursement
d. Overstatement in bank receipts
a. Overstatement in bank disbursement
Following are reconciling items in an enterprise’s bank reconciliation statement.
I. Deposits in transit
II. Company check for P32,500 recorded in the books for P23,500
Ill. Note collected by bank in behalf of the company
IV. Deposit of another company erroneously credited by bank to the company’s account
V. No sufficient fund check charged back by bank
VI. Company deposit for P32,500 recorded in the books for P23,500.
Which of these adjustments would be shown as addition to the cash balance per books in order to arrive at the correct cash balance?
a. II and III
b. III and VI
c. II, III, and VI
d. II, V and VI
b. III and VI
The journal entries for a bank reconciliation
a. are taken from the “balance per bank” section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a debit to Accounts Payable for an NSF check.
d. may include a credit to Accounts Receivable for an NSF check.
b. may include a debit to Office Expense for bank service charges.
