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Accounting > ch 7 > Flashcards

ch 7 Flashcards

1
Q

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is

A

bank service charges.

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2
Q

A company reports a debit balance in Cash Over and Short as a(n)

A

miscellaneous expense

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3
Q

On a bank reconciliation, outstanding checks are

A

deducted from the bank balance.

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4
Q

Internal control consists of all the related methods and measures adopted within an organization to safeguard assets, enhance the accuracy and reliability of accounting records, increase efficiency of operations, and ensure compliance with laws and regulations

T/F

A

true

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5
Q

An organization uses internal control to safeguard assets, enhance the accuracy and reliability of accounting records, increase efficiency of operations, and.

A

ensure compliance with laws and regulations

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6
Q

A disbursement system that uses wire, telephone, or computers to transfer cash balances from one location to another is called a(n)

A

electronic funds transfer system

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7
Q

Which of the following is not a result of the Sarbanes-Oxley Act?

A

Companies must file financial statements with the Internal Revenue Service

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8
Q

Control is most effective when two people are responsible for a given task.

T/F

A

false

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9
Q

Which of the following statements is true under IFRS?

A.) IFRS defines cash as cash on hand and demand deposits.
B.) IFRS defines cash equivalents as short-term, highly liquid investments that are readily convertible to known amounts of cash.
C.) IFRS reports cash and cash equivalents in the statement of financial position.
D.) All of these answer choices are correct.

A

All of these answer choices are correct.

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10
Q

The Sarbanes Oxley Act (SOX) internal control standards apply only to companies listed on the U.S. exchanges.

T/F

A

TRUE

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11
Q

Cash equivalents include all of the following except

A.) Restricted cash.
B.) Money market funds.
C.) Commercial paper.
D.) U.S. Treasury bills.

A

Restricted cash.

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12
Q

All of the following are classified as cash except

A.) restricted cash.
B.) checks.
C.) money orders.
D.) money on hand.

A

restricted cash

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13
Q

Which of the following statements correctly describes the reporting of cash?

A,) Restricted cash funds cannot be reported as a current asset.
B.) Cash cannot be combined with cash equivalents.
C.) Restricted cash funds may be combined with Cash.
D.) Cash is listed first in the current assets section.

A

Cash is listed first in the current assets section.

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14
Q

Which of the following items at November 30 is not cash or cash equivalent?

A.) Coins and currency.
B.) Money market funds.
C.) Money orders.
D.) Treasury bond

A

Treasury bond

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15
Q

Restricted cash expected to be used within the next year should be

A

reported as a current asset

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16
Q

Cash equivalents include each of the following except

A. Money market funds.
B. Petty cash.
C. U.S. Treasury bills.
D. Commercial paper.

A

Petty cash.

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17
Q

Dewitt Company gathered the following information in preparing its bank reconciliation on May 31: Cash balance per books, May 31, $3,500; deposits in transit, $1,150; note and interest collected by the bank, $850; bank service charge, $20; outstanding checks, $2,500; NSF check, $170. The adjusted cash balance per books at May 31 is

A

Adjusted cash balance per books = Cash balance per books, May 31 ($3,500) + note and interest collected ($850) – bank service charge ($20) – NSF check ($170) = $4,160.

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18
Q

On a bank reconciliation, collection of a note receivable by the bank is

A

added to the book balance

19
Q

If a check written and paid by the bank for $638 is incorrectly recorded on the company’s books at $683, the appropriate treatment on the bank reconciliation would be to

A

add $45 to the book’s balance

[In this situation, the company’s Cash account has been understated due to the error. Therefore, the difference between the amount recorded on the company’s books and the amount paid by the bank ($683 - $638 = $45) should be added to the book’s balance.]

20
Q

In a bank reconciliation, a bank service charge is

A

deducted from the book balance

21
Q

Journal entries are required by the depositor for all of the following except

A. an NSF check.
B. collection of a note receivable.
C. bank errors.
D. bank service charges.

A

bank errors.

22
Q

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

T/F

A

TRUE

23
Q

All of the following would involve a debit memorandum except

A. interest earned.
B. a bank service charge.
C. the cost of printing checks.
D.an NSF check.

A

interest earned

24
Q

The party who issues a check is the

A

maker

25
Q

The control features of a bank account do not include

A. having bank auditors verify the correctness of the balance per books.
B. providing a double record of all bank transactions.
C. minimizing the amount of cash that must be kept on hand.
D. safeguarding cash by using a bank as a depository.

A

having bank auditors verify the correctness of the balance per books.

26
Q

A bank may issue a credit memorandum for

A

the collection of a note receivable by the bank for the depositor

27
Q

There are two parties to a check: the maker and the payee.

T/F

A

FALSE

28
Q

A petty cash fund of $200 is replenished when the fund contains $5 in cash and receipts of $190. The entry to replenish the fund would

A

debit Cash Over and Short for $5.

[The correct journal entry would be to debit the related expense accounts for the receipts, $190, debit Cash Over and Short, $5 ($195 - $190) and credit cash, $195]

29
Q

Making payments from a petty cash fund requires

A

no accounting entry to record a payment when it is made from petty cash.

30
Q

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 Over and Short for $3

31
Q

Companies use a petty cash fund to pay relatively small amounts.

T/F

A

TRUE

32
Q

Printing check amounts by machine in indelible ink is an example of

A

physical controls

33
Q

The use of pre-numbered checks in disbursing cash is an application of the principle of

A

documentation procedures.

34
Q

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

T/F

A

TRUE

35
Q

Cash is the asset most susceptible to fraudulent activities.

T/F

A

TRUE

36
Q

Having different individuals receive cash, record cash receipts, and hold the cash is an example of

A

segregation of duties

37
Q

Large companies often assign independent internal verification to the

A

internal auditors

38
Q

Controls that relate primarily to the safeguarding of assets are

A

physical controls

39
Q

The principles of internal control include all of the following except

A. combining of duties.
B. independent internal verification.
C. physical controls.
D. establishment of responsibility.

A

combining of duties

40
Q

Which of the following control activities is relevant when a company uses a computerized (rather than manual) accounting system?

A. Establishment of responsibility
B. Segregation of duties
C. Independent internal verification
D. All of these answer choices are correct

A

All of these answer choices are correct

41
Q

Physical controls do not include

A. locked warehouses for inventories.
B. safes and vaults to store cash.
C. bank safety deposit boxes for important papers.
D. independent bank reconciliations.

A

independent bank reconciliations.

42
Q

The principles of internal control do not include

A. management responsibility.
B. establishment of responsibility.
C. independent internal verification.
D. documentation procedures

A

management responsibility.

43
Q

The use of remittance advices for mail receipts is an example of

A

documentation procedures

Accounting (10 decks)

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