Chapter 7 self questions Flashcards
Which of the following statements correctly describes the reporting of cash?
(a) Cash cannot be combined with cash equivalents.
(b) Restricted cash funds may be combined with cash.
(c) Cash is listed first in the current assets section.
(d) Restricted cash funds cannot be reported as a current asset.
Cash is listed first in the current assets section
Which of the following items in a cash drawer at November 30 is not cash?
(a) Money orders.
(b) Coins and currency.
(c) An NSF check.
(d) A customer check dated November 28.
An NSF check.
The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is:
(a) outstanding checks.
(b) deposit in transit.
(c) a bank error.
(d) bank service charges.
bank service charges.
In a bank reconciliation, deposits in transit are:
(a) deducted from the book balance.
(b) added to the book balance.
(c) added to the bank balance.
(d) deducted from the bank balance
added to the bank balance.
The control features of a bank account do not include:
(a) having bank auditors verify the correctness of the bank balance per books.
(b) minimizing the amount of cash that must be kept on hand.
(c) providing a double record of all bank transactions.
(d) safeguarding cash by using a bank as a depository
having bank auditors verify the correctness of the bank balance per books.
A company writes a check to replenish a $100 petty cash fund when the fund contains receipts of $94 and $4 in cash. In recording the check, the company should:
(a) debit Cash Over and Short for $2.
(b) debit Petty Cash for $94.
(c) credit Cash for $94.
(d) credit Petty Cash for $2.
debit Cash Over and Short for $2.
[$100-($94 + $4)]
The use of prenumbered checks in disbursing cash is an application of the principle of:
(a) establishment of responsibility.
(b) segregation of duties.
(c) physical controls.
(d) documentation procedures
documentation procedures
Permitting only designated personnel to handle cash receipts is an application of the principle of:
(a) segregation of duties.
(b) establishment of responsibility.
(c) independent internal verification.
(d) human resource controls.
establishment of responsibility
Which of the following control activities is not 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 control activities are relevant to a computerized system
All of these control activities are relevant to a computerized system.
Physical controls do not include:
(a) safes and vaults to store cash.
(b) independent bank reconciliations.
(c) locked warehouses for inventories.
(d) bank safety deposit boxes for important papers.
independent bank reconciliations
The principles of internal control do not include:
(a) establishment of responsibility.
(b) documentation procedures.
(c) management responsibility.
(d) independent internal verification
management responsibility
Which of the following was not a result of the Sarbanes-Oxley Act?
(a) Companies must file financial statements with the Internal Revenue Service.
(b) All publicly traded companies must maintain adequate internal controls.
(c) The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity.
(d) Corporate executives and board of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so.
Companies must file financial statements with the Internal Revenue Service.
An organization uses internal control to enhance the accuracy and reliability of accounting records and to:
(a) safeguard assets.
(b) eliminate fraud.
(c) produce correct financial statements.
(d) deter employee dishonesty.
safeguard assets.
Which of the following is not an element of the fraud triangle?
(a) Rationalization.
(b) Financial pressure.
(c) Segregation of duties.
(d) Opportunity.
Segregation of duties.
