Chapter 8- Internal Controls

Question 0

What is segregation of duties?

Answer 0

Different individuals are in charge of certain parts of the accounting process

Question 1

What is establishment of responsibility?

Answer 1

Only designated personel authorized to handle cash receipts

Question 2

What are documentation procedures?

Answer 2

Use mail receipts, cash register tapes, and deposit slips

Question 3

What is safeguarding assets and records?

Answer 3

Store cash in safes/vaults, limit access to them

Question 4

What is independant verification?

Answer 4

Count cash daily, compare receipts to bank deposits

Question 5

What are other controls?

Answer 5

Personnel who handle cash require vacations, cash deposited in bank daily

Question 6

What is the journal entry to establish a petty cash fund?

Answer 6

Petty Cash

Cash

Question 7

What is the journal entry to replenish Petty Cash?

Answer 7

Freight-In
Supplies Expense
Misc Expense
Cash

Question 8

What is an advantage of having a business bank account?

Answer 8

Physical control over cash

Question 9

What are cash equivalents?

Answer 9

Highly liquid investments w/ maturity of 3 months or less and can be converted into cash

Question 10

What is the procedure for the per bank section of the bank rec?

Answer 10

$ per bank statement
-outstanding cheques
\+deposits in transit
\+/- bank errors
$ adjusted cash balance per bank

Question 11

What is the procedure for the per books section of the bank rec?

Answer 11

$ per books
-NSF cheques
-Cheque printing/other service charges
\+Notes collected by bank
\+/- Book errors

Question 12

What are the items on a bank rec that require a journal entry?

Answer 12

Collection of note receivable
Book error
NSF cheques
Bank service charges