Chap 8

Question 1

Reasons for dishonored cheques

Answer 1

Expired, information is not complete, post-dated

Question 2

Purpose of internal controls

Answer 2

• To safeguard assets of the business
• To detect occurrence against fraud
• comply with laws and regulations

Question 3

Why are internal controls needed to protect cash?

Answer 3

Cash is highly portable and has a high chance of getting stolen. internal controls help to reduce the possibility of theft to ensure that cash is well-protected.

Question 4

Examples of internal controls

Answer 4

Segregation of duties, bank reconciliation, authorization

Question 5

Purpose of the bank reconciliation

Answer 5

Act as deterrence against fraud, Identify errors in the bank statement or cash at bank account

Question 6

Why a debit balance in a business CAB account is shown as a credit balance in the bank statement?

Answer 6

The CAB account is an asset of the business so it has a debit bal in the business books however, the bank treats the deposits as liabilities as the deposits do not belong to the bank. hence, the deposits are recorded as credit balances in the bank statement.