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Principles of Accounting - Financial > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

What are the 2 reasons that companies would issue incorrect financial statements?

A
  1. Errors

2. Fraud

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2
Q

What are accidental errors in recording (or failing to record) transactions or in applying accounting rules?

A

Errors

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3
Q

What occurs when a person intentionally deceives another person for personal gain or to damage that person?

A

Fraud

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4
Q

What is the difference between an error and fraud?

A

An error is accidental while fraud is intentional

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5
Q

What is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employer’s resources?

A

Occupational fraud

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6
Q

What are the 3 elements that are present when fraud occurs?

A
  1. Opportunity
  2. Motivation
  3. Rationalization
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7
Q

What can be done to help minimize fraud?

A

Eliminating one of the 3 elements that are present when fraud occurs

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8
Q

Of the three fraud elements, which one do companies have the greatest ability to eliminate?

A

Opportunity

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9
Q

What is a formal procedure that attempts to eliminate the opportunity element of fraud?

A

Internal controls

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10
Q

What represents plans to safeguard the company’s assets and improve the accuracy and reliability of accounting information?

A

Internal control

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11
Q

Who are entrusted with the resources of both the company’s lenders and owners?

A

Managers

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12
Q

Who acts as stewards or caretakers of the company’s assets?

A

Managers

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13
Q

What are two of the highest-profile cases of accounting fraud in U.S. history?

A

The collapse of Enron and WorldCom

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14
Q

Who used questionable accounting practices to avoid reporting billions in debt and losses in its financial statements?

A

Enron

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15
Q

Who misclassified certain expenditures to overstate assets and profitability?

A

WorldCom

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16
Q

True or False:

The auditor can’t have any type of relationship with the company

A

True

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17
Q

What act established a variety of guidelines related to auditor-client relations and internal control procedures?

A

The Sarbanes-Oxley Act

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18
Q

Who has the authority to establish standards dealing with auditing, quality control, ethics, independence, and other activities relating to the preparation of audited financial reports?

A

The Oversight board

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19
Q

Which of the following statements is NOT true of the Sarbanes-Oxley Act (SOA) of 2002?

a. All companies in the U.S. fall under its provisions.
b. It helped establish guidelines for internal control procedures.
c. It helped establish corporate executive accountability.
d. It helped establish guidelines for auditor-client relations.

A

a. All companies in the U.S. fall under its provisions.

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20
Q

Which companies does the SOA apply to?

A

Companies who are required to file financial statements with the SEC

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21
Q

What are the policies and procedures that help ensure that management’s directives are being carried out?

A

Control activities

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22
Q

What identifies and analyzes internal and external risk factors that could prevent a company’s objectives from being achieved?

A

Risk assessment

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23
Q

What sets the overall ethical tone of the company with respect to internal control?

A

The control environment

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24
Q

What is required of internal activities and reporting of deficiencies?

A

Continual monitoring

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25
Q

List the 3 ways to detect fraud

A
  1. Auditors
  2. Reconciliations
  3. Performance Reviews
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26
Q

Who signs a report each year certifying adequacy of internal controls?

A

CEOs and CFOs

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27
Q

Who provides an opinion on management’s assessment of internal control over financial reporting?

A

Auditors

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28
Q

Can Auditors test all accounts?

A

No

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29
Q

Why can’t Auditors test all accounts?

A

It’s too timely and costly

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30
Q

Activities such as authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees is an example of what preventative control?

A

Separation of Power

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31
Q

Assets and accounting records must be kept safe and accessible only to authorized personnel is an example of what preventative control?

A

Physical Control

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32
Q

Only personnel with authorization should be allowed to collect money, process transactions, or make purchases is an example of what preventative control?

A

Proper Authorization

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33
Q

Employees should be trained to carry out their job and must be made aware of any internal control procedures, ethical responsibilities, and channels for reporting irregular activities is an example of what preventative control?

A

Employee Management

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34
Q

Only authorized personnel should have passwords to conduct electronic business transactions; firewalls are maintained to prevent unauthorized access; and the system’s antivirus software should be regularly updated is an example of what preventative control?

A

E-Commerce Controls

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35
Q

If a company places cash receipts from the day in a safe or bank deposit box, this would be an example of:

a. Separation of duties
b. Physical control
c. Reconciliation
d. Performance review

A

b. Physical control

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36
Q

What are internal control systems easily susceptible to?

A

Collusion

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37
Q

What occurs when two or more people act together to circumvent (avoid) internal controls?

A

Collusion

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38
Q

Who are the ones who must take final responsibility for the establishment and success of internal controls?

A

Top executives

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39
Q

Everyone in the company has an impact on the operations and effectiveness of internal control, but who must take final responsibility?

a. Internal auditors
b. Top executives
c. The firm’s attorney
d. The majority shareholder

A

b. Top executives

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40
Q

Fill in the Blanks:

Anything that matures ________ or less is considered cash

A

3 months

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41
Q

Fill in the Blank:

Anything that matures 3 months or less is considered _____

A

Cash

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42
Q

Fill in the Blank:

Anything that matures ________ or less is considered _____

A
  1. 3 months

2. Cash

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43
Q

Which of the following would NOT be considered a cash equivalent?

a. Credit card sales for the day
b. Debit card sales for the day
c. Money orders received from customers
d. Certificate of deposit (CD) that matures one year from now

A

d. Certificate of deposit (CD) that matures one year from now

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44
Q

What are generally defined as investments that mature within three months from the date of purchase?

A

Cash equivalents

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45
Q

What is an important control used by nearly all companies to help maintain control of cash?

A

Bank Reconciliation

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46
Q

What matches the balance of cash in the bank account with the balance of cash in the company’s own records ?

A

The bank reconciliation

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47
Q

What occur when the company records transactions either before or after the bank records the same transactions?

A

Timing differences

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48
Q

What 2 things do we need to identify in order to understand why the company’s balance and the bank’s balance differ?

A
  1. Timing differences

2. Any errors

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49
Q

List 2 cash transactions recorded by the company, but not yet recorded by its bank

A
  1. Deposits Outstanding

2. Checks Outstanding

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50
Q

What are cash receipts of the company that have not been added to the bank’s record of the company’s balance?

A

Deposits Outstanding

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51
Q

What are checks the company has written that have not been subtracted from the bank’s record of the company’s balance?

A

Checks Outstanding

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52
Q

On a bank reconciliation sheet does checks outstanding go under the bank’s side or the company’s side?

A

The bank’s side

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53
Q

On a bank reconciliation sheet does deposits outstanding go under the bank’s side or the company’s side?

A

The bank’s side

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54
Q

On a bank reconciliation sheet is the deposits outstanding a positive or negative amount?

A

A positive amount (your depositing money)

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55
Q

On a bank reconciliation sheet is the checks outstanding a positive or negative amount?

A

A negative amount (your writing a check)

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56
Q

What are items that cannot be located on the bank statement?

A

Reconciling items

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57
Q

On a bank reconciliation sheet what does the bank’s cash balance begin with?

A

The per bank statement

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58
Q

On a bank reconciliation sheet what does the company’s cash balance begin with?

A

The general ledger

59
Q

What are common items that will increase the company’s cash balance?

A
  1. Notes received
  2. Interest earned from note
  3. Interest earned on bank account
60
Q

What are common items that will decrease the company’s cash balance?

A
  1. NSF checks
  2. Debit card purchases
  3. Electronic funds transfers (EFTs)
  4. Bank service fees
61
Q

What does NSF stand for?

A

Nonsufficient funds

62
Q

What are NSF checks?

A

Checks that bounce back

63
Q

On a bank reconciliation sheet is interest earned a positive or negative amount?

A

A positive amount

64
Q

On a bank reconciliation sheet is a bank service fee a positive or negative amount?

A

A negative amount

65
Q

On a bank reconciliation sheet is a NSF check a positive or negative amount?

A

A negative amount

66
Q

On a bank reconciliation sheet is a note received by the bank a positive or negative amount?

A

A positive amount

67
Q

What side of a bank reconciliation sheet does note received by the bank go under?

A

The company’s side

68
Q

On a bank reconciliation sheet is an unrecorded EFT a positive or negative amount?

A

A negative amount

69
Q

On a bank reconciliation sheet is an error a positive or negative amount?

A

It can be either or

70
Q

On a bank reconciliation sheet is an unrecorded debit card a positive or negative amount?

A

A negative amount

71
Q

On a bank reconciliation sheet what does the bank’s cash balance end with?

A

The bank’s balance per reconciliation

72
Q

On a bank reconciliation sheet what does the company’s cash balance end with?

A

The company’s balance per reconciliation

73
Q

What do you have to do after you do you bank reconciliation sheet?

A

You have to make your adjusting entries

74
Q

Which of the following items would be found on the “bank side,” or the left-hand side, of the bank reconciliation?

a. Interest income received on the account
b. Deposit outstanding
c. NSF check from a customer
d. Service fee charged by the bank

A

b. Deposit outstanding

75
Q

What 3 things are commonly found on the Bank’s Cash Balance?

A
  1. Deposits Outstanding
  2. Checks Outstanding
  3. Bank errors
76
Q

How would an NSF check from a customer be treated on a bank reconciliation?

a. Addition on the bank side
b. Deduction on the bank side
c. Addition on the company side
d. Deduction on the company side

A

d. Deduction on the company side

77
Q

After you make your bank reconciliation sheet you have to make adjusting entries for new entries:

a. Only on the company’s side
b. Only on the bank’s side
c. On both sides
d. On neither side, you don’t have to do adjusting entries

A

a. Only on the company’s side

78
Q

Filling in the Blank:

In an adjusting entry you _____ cash for items that add to the balance

A

Debit (4-53)

79
Q

Filling in the Blank:

In an adjusting entry you _____ cash for items that subtract from the balance

A

Credit (4-53)

80
Q

How would an NSF check from a customer be recorded in the accounting records?

a. Debit Accounts Receivable; Credit Cash
b. Debit Cash; Credit Accounts Receivable
c. Debit Accounts Payable; Credit Cash
d. Debit Cash; Credit Miscellaneous Expense

A

a. Debit Accounts Receivable; Credit Cash

81
Q

What is a small amount of cash kept on hand to pay for minor purchases?

A

A Petty Cash Fund

82
Q

Accounting for the petty cash fund involves recording transactions/entries to do what 3 things?

A
  1. Establishing the fund
  2. Recognizing expenditures (expenses) from the fund
  3. Replenishing the fund
83
Q

When you are accounting for the petty cash fund do you need to record transactions that are done with debit cards and checks?

A

No

84
Q

When you are accounting for the petty cash fund why don’t you need to record transactions done with debit cards and checks?

A

They are already recorded in the bank reconciliation sheet

85
Q

When you are accounting for the petty cash fund do you need to record transactions that are done with credit cards?

A

Yes

86
Q

Make a journal entry:

Establish a petty cash fund of $200
Remove cash from the bank and place it on hand at the company

A

Debit: Petty Cash Fund $200
Credit: Cash $200

87
Q

When you make a journal entry to establish a petty cash fund what do you debit and credit?

A
  1. You debit the petty cash fund

2. You credit cash

88
Q

When you make a journal entry to recognize expenses from the petty cash fund what do you credit?

A

The petty cash fund

89
Q

When you are making journal entries for the petty cash fund what do you credit if an expense was made with a credit card?

A

You credit accounts payable

90
Q

When you are making journal entries for the petty cash fund involving an expense made with a credit card why do you credit accounts payable instead of the petty cash fund?

A

The expense hasn’t been paid for yet and you didn’t use any of the petty cash fund money

91
Q

When you make a journal entry to replenish a petty cash fund what do you debit and credit?

A
  1. You debit petty cash

2. You credit cash

92
Q

Make a journal entry:

The fund has only $50 left in it, so management withdraws an additional $150 from the bank to replenish the funds.

A

Petty Cash $150

Cash $150

93
Q

What’s the difference between the journal entries for establishing and replenishing the petty cash fund?

A

When you establish the petty cash fund the debit is the petty cash fund. When you replenish the petty cash fund the debit is petty cash.

94
Q

What is inflow?

A

Cash coming in

95
Q

What is outflow?

A

Cash going out

96
Q

What reports cash balance at the end of the period?

A

The Balance Sheet

97
Q

What reports cash receipts and cash payments during the period?

A

The Statement of Cash Flow

98
Q

What’s the difference between the balance sheet and the statement of cash flow?

A

The balance sheet reports at the end of the period while the statement of cash flow reports during the period

99
Q

List the three fundamental types of business activities relating to cash

A
  1. Operating Activities
  2. Investing Activities
  3. Financing Activities
100
Q

Which activities include cash transactions involving revenue and expense events during the period?

A

Operating Activities

101
Q

List some examples of operating activities

A

Cash received from customers, cash paid for rent, utilities, supplies, and salaries

102
Q

Which activities include cash investments in long-term assets and investment securities?

A

Investing Activities

103
Q

List some examples of investing activities

A

Purchase or sell of land, equipment, and buildings for cash, buying stock

104
Q

Do investing activities tend to include long-term or short-term assets?

A

Long-term assets

105
Q

Which activities include transactions designed to finance the business through borrowing and owner investment?

A

Financing Activities

106
Q

List some examples of financing activities

A

Issue common stock or pay dividends; borrow or repay debt, taking a loan, companies selling stocks

107
Q

Which of the following items would be categorized as an investing activity on a statement of cash flows?

a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees

A

c. Paid for the purchase of equipment using cash

108
Q

Which of the following items would be categorized as an operating activity on a statement of cash flows?

a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees

A

b. Paid for supplies in cash

d. Paid salaries to employees

109
Q

Which of the following items would be categorized as an financing activity on a statement of cash flows?

a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees

A

a. Borrowed money from the local bank by signing a note to repay the full amount two years later

110
Q

Which of the following statements is true?

a. Having too much cash represents idle resources that are not being used to produce revenues.
b. One way to assess cash holdings is to compare cash assets to noncash assets.
c. In recent years cash holdings have increased tremendously.
d. All of the above are true.

A

d. All of the above are true.

111
Q

Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Operating Board

a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.

A

c. PCAOB establishes standards related to the preparation of audited financial reports.

112
Q

Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Corporate executive accountability

a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.

A

a. Executives must personally certify the company’s financial statements.

113
Q

Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Auditor rotation

a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.

A

d. Lead audit partners are required to change every five years.

114
Q

Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Nonaudit services

a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.

A

b. Audit firm cannot provide a variety of other services to its client, such as investment advising.

115
Q

Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Internal control

a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.

A

e. Management must document the effectiveness of procedures that could affect financial reporting.

116
Q

Match each of the following control activities with its definition: Separation of duties

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.

117
Q

Match each of the following control activities with its definition: Physical Controls

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

a. The company should maintain security over assets and accounting records.

118
Q

Match each of the following control activities with its definition: Proper authorization

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

119
Q

Match each of the following control activities with its definition: Employee management

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.

120
Q

Match each of the following control activities with its definition: Reconciliations

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.

121
Q

Match each of the following control activities with its definition: Performance reviews

a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.

A

d. The actual performance of individuals or processes should be checked against their expected performance.

122
Q

Match each term associated with a bank reconciliation with its description: Checks Outstanding

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

d. Checks written by the company but not yet recorded by the bank.

123
Q

Match each term associated with a bank reconciliation with its description: NSF Checks

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

c. Checks written to the company that are returned by the bank as not having adequate funds.

124
Q

Match each term associated with a bank reconciliation with its description: Company Error

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

f. The company recorded a deposit twice.

125
Q

Match each term associated with a bank reconciliation with its description: Interest Earned

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

e. Money earned on the average daily balance of the checking account.

126
Q

Match each term associated with a bank reconciliation with its description: Deposits Outstanding

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

a. Cash receipts received by the company but not yet recorded by the bank.

127
Q

Match each term associated with a bank reconciliation with its description: Bank Service Fee

a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.

A

b. Fees imposed by the bank to the company for providing routine services.

128
Q

For each transaction, indicate the following: Borrow cash from the bank.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Financing
  3. Inflow
129
Q

For each transaction, indicate the following: Purchase supplies on account.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. No
  2. N/A (-)
  3. N/A (-)
130
Q

For each transaction, indicate the following: Purchase equipment with cash.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Investing
  3. Outflow
131
Q

For each transaction, indicate the following: Provide services on account.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. No
  2. N/A (-)
  3. N/A (-)
132
Q

For each transaction, indicate the following: Pay cash on account for b. above. (Purchase supplies on account)
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Operating
  3. Outflow
133
Q

For each transaction, indicate the following: Sell for cash a warehouse no longer in use.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Investing
  3. Inflow
134
Q

For each transaction, indicate the following: Receive cash on account for d. above. (Provide services on account.)
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Operating
  3. Inflow
135
Q

For each transaction, indicate the following: Pay cash to workers for salaries.
(Enter N/A if the question is not applicable to the statement)

  1. Is cash involved?
  2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
  3. Is the cash an inflow or outflow?
A
  1. Yes
  2. Operating
  3. Outflow
136
Q

Transaction: Issue common stock for cash, $60,000.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 60,000

2. Financing

137
Q

Transaction: Purchase building and land with cash, $45,000.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 45,000

2. Investing

138
Q

Transaction: Provide services to customers on account, $8,000.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A

N/A

139
Q

Transaction: Pay utilities on building, $1,500.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 1,500

2. Operating

140
Q

Transaction: Collect $6,000 on account from customers.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 6,000

2. Operating

141
Q

Transaction: Pay employee salaries, $10,000.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 10,000

2. Operating

142
Q

Transaction: Pay dividends to stockholders, $5,000.

  1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
  2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.

Enter N/A if the question is not applicable to the statement.

A
    • 5,000

2. Financing

143
Q

What are the 5 preventative controls?

A
  1. Separation of Power
  2. Physical Control
  3. Proper Authorization
  4. Employee Management
  5. E-Commerce Controls

Principles of Accounting - Financial (11 decks)

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