Cash and Internal Control

Question 1

What is an Internal Control System used for?

Answer 1

1. Protect asset
2. Ensure reliable accounting
3. Promote efficient operation
4. Urge adherence to company policies

Question 2

List the limitations of the Internal Control Systems:

Answer 2

1. Human error

2. Human fraud

Question 3

What are cash equivalents?

Answer 3

Cash equivalents are highly liquid investments that are generally:

1. Highly liquid
2. Insignificant risk

Question 4

What makes a good Internal Control System?

Answer 4

1. Handling Cash is separated from record keeping of cash
2. Cash disbursements are made by cheque
3. Cash receipts are promptly deposited in a bank

Question 5

What are the keys to controlling cash disbursements?

Answer 5

1. Require expenditures to be made by cheque

2. Limited access (except for those who have the authority to sign the cheques)

Question 6

What are the goals of cash management?

Answer 6

1. Plan cash receipts to meet cash payments when due

2. Keep minimum level of cash necessary to operate

Question 7

What is bank reconciliation?

Answer 7

Bank reconciliations are prepared periodically to explain the difference between cash reported on the bank statement and the balance on the company’s books

Question 8

What is in the cash balance per BANK?

Answer 8

+ Deposit in Transit
- Outstanding cheques
+/- Errors

Question 9

What is in the cash balance per BOOK?

Answer 9

+ Collections and interests
- Uncollectible items
+/- Errors