ch 6 concept

Question 1

Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)

Answer 1

Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry.

Technology has reduced the number of processing errors.

Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft.

Question 2

Which of the statements below describe the goals and principles of cash management? (Check all that apply.)

Answer 2

Plan cash receipts to meet cash payments when due.

Keep a minimum level of cash necessary to operate.

Money should be spent only when it is available.

Encourage quick collection of receivables.

Question 3

A good internal control to protect cash is to make cash payments using

Answer 3

checks

Question 4

Good recordkeeping helps protect assets and helps managers:

Answer 4

monitor company activities

Question 5

Which of the answers below correctly describe the Cash Over and Short account?

Answer 5

It is an income statement account.

It records the effects of cash overages and cash shortages.

A debit balance reflects an expense.

Question 6

Review the following statements and select the ones which accurately describe a Petty Cash fund. Select all answers which apply.

Answer 6

It is established to pay for small payments like low-cost supplies and shipping fees, etc.

It is an asset reported on the balance sheet.

Question 7

Identify which of the items below are goals of good cash management

Answer 7

Plan cash receipts to meet cash payments when due.

Keep a minimum level of cash necessary to operate.

Question 8

Determine which of the statements below describes a petty cash receipt

Answer 8

The petty cashier must present all paid receipts to the company cashier in order to replenish the fund.

A petty cash receipt is sometimes called a petty cash ticket.

A petty cash receipt will have a signature line for the person receiving a payment from the fund.

Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt.

Question 9

Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below.

Answer 9

Reliable records are a source of information that managers use to monitor activities.

Keeping detailed records makes it unlikely that assets are lost or stolen without detection.

Question 10

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business

Answer 10

A check is drawn by the company cashier to establish the petty cash fund.

The petty cashier is responsible for keeping the cash in the fund safe.

The petty cashier is responsible for making payments from the petty cash fund.

The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time.

Question 11

Identify when the Petty Cash fund is debited or credited by selecting the correct answer below.

Answer 11

When the account is reduced

When the account is created

When the account is increased

Question 12

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy

Answer 12

The Cash account will be debited for $105.

The Cash Over and Short account will be credited for $5.

The Sales account will be credited for $100.

The extra $5 collected will be treated as a miscellaneous revenue.

Question 13

Determine which of the statements below accurately describe services provided by a bank. (

Answer 13

Each bank deposit is supported by a deposit ticket.

A bank account is a record set up by a bank for a customer.

To withdraw money from an account, the depositor can use a check.

Question 14

Determine which of the items below would show up on a monthly bank statement.

Answer 14

Deposits and other increases to the account during the period

Beginning-of-period balance in the account

End-of-period balance in the account

Withdrawals and other decreases to the account during the period

Question 15

Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period

Answer 15

The balance sheet would show an overstated cash asset.

The income statement would reflect a net income amount that was too high.

Expenses would not be recorded in the period in which they were incurred.

Question 16

Determine the statements below that are true regarding why a bank reconciliation is used.

Answer 16

The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.

We must reconcile the balance of the bank’s records and the Cash account in the general ledger and explain or account for any differences in the two.

Timing differences between the bank statement and the depositor’s records are reflected in the bank reconciliation.

Question 17

Determine which of the statements below is correct regarding information reflected on a monthly bank statement

Answer 17

The information on the bank statement reflects the bank’s records of the depositor’s account.

Question 18

Select the items below that would cause the bank statement balance to differ from the depositor’s book balance.

Answer 18

NSF check, Deposit in transit, interest paid by bank

Question 19

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct.

Answer 19

Only the petty cashier is responsible for paying cash from the fund.

Question 20

Choose the items below that would be added to the book balance on a bank reconciliation.

Answer 20

Interest earned on the depositor’s account

Note collected by the bank for the depositor

Question 21

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence.

Answer 21

1. Enter the bank statement balance
2. Compute the adj bank balance
3. enter the company’s book balance
4. add any unrecorded
5. subtract any unrecorded
6. compute the adj

Question 22

abc

Answer 22

ABC Co. is shortening the amount of time that money is tied up in receivables.

ABC Co. took approximately 31 days to collect cash from its credit customers in the current year.

ABC Co. has shortened the amount of time it takes to collect receivables from customers.

Question 23

Recall the preparation of a bank reconciliation by selecting the correct items below.

Answer 23

Compute the adjusted book balance.

Add deposits in transit to the bank balance.

Subtract any outstanding checks from the bank balance.

Compute the adjusted bank balance.

Question 24

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence.

Answer 24

1. Enter the bank statement
   2, Compute
2. Enter the company
3. Add any unrecorded
4. subtract any unrecorded
5. compute the adj book bal and compare