Question 1

The clerk who has access to the cash in the cash register should also have access to the cash register tape or file.

Accepted Answer

A) True 
 B)False

Question 2

Two clerks sharing the same cash register is a violation of which internal control principle?

Accepted Answer

A)  Establish responsibilities.
B)  Maintain adequate records.
C)  Insure assets.
D)  Bond key employees.
E)  Apply technological controls.F) A) and B)
G) All of the above

Question 3

Great Falls Co.'s bank reconciliation as of February 28 is shown below.  One of the adjusting journal entries that Great Falls must record as a result of the bank reconciliation includes:

Accepted Answer

A)  Debit Note Payable $745; credit Cash $745.
B)  Debit Cash $745; credit Note Receivable $745.
C)  Debit Cash $2,950; credit Sales $2,950.
D)  Debit Cash $2,950; credit Accounts Receivable $2,950.
E)  Debit Miscellaneous Expense $35; credit Accounts Payable $35.F) B) and E)
G) D) and E)

Question 4

At the end of the current period,a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable.Calculate this company's days' sales uncollected at the end of the current period.

Accepted Answer

Days' Sales Uncollected Ratio ...

Question 5

Outstanding checks,deposits in transit,and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

Accepted Answer

A) True 
 B)False

Question 6

A properly designed internal control system:

Accepted Answer

A)  Lowers the company's risk of loss.
B)  Insures profitable operations.
C)  Eliminates the need for an audit.
D)  Requires the use of non-computerized systems.
E)  Is not necessary if the company uses a computerized system.F) B) and E)
G) A) and C)

Question 7

Which of the following events would cause a bank to debit a depositor's account?

Accepted Answer

A)  The depositor orders new checks through the bank at a cost of $50.
B)  The bank collects a note receivable and related interest on the depositor's behalf.
C)  There are outstanding checks drawn on the account at month-end.
D)  There are deposits in transit on the account at month-end.
E)  The bank corrects an error from previous month by adding $75 to the depositor account.F) A) and B)
G) B) and C)

Question 8

If the Cash Over and Short account has a credit balance at the end of the period,the amount is commonly reported as miscellaneous revenue.

Accepted Answer

A) True 
 B)False

Question 9

The entry to record reimbursement of the petty cash fund for postage expense should include:

Accepted Answer

A)  A debit to Postage Expense.
B)  A debit to Petty Cash.
C)  A debit to Cash.
D)  A debit to Cash Short and Over.
E)  A debit to Supplies.F) A) and E)
G) A) and D)

Question 10

Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

Accepted Answer

A) True 
 B)False

Question 11

Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

Accepted Answer

A)  Promoting efficient operations.
B)  Protecting assets.
C)  Upholding company policies.
D)  Ensuring reliable accounting.
E)  Assuring that no loss will occur.F) None of the above
G) B) and C)

Question 12

The use of internal controls provides a guarantee against losses due to operating activities.

Accepted Answer

A) True 
 B)False

Question 13

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:

Accepted Answer

A)  Deduct the check amount from the book balance of cash.
B)  Add the check amount to the book balance of cash.
C)  Deduct the check amount from the bank balance.
D)  Add the check amount to the bank balance.
E)  Make a journal entry in the company records for an error.F) B) and C)
G) A) and E)

Question 14

Cash equivalents meet all of the following criteria except:

Accepted Answer

A)  Readily convertible to a known cash amount.
B)  Short-term investments purchased within 3 months of their maturity dates.
C)  Have a market value that is not sensitive to interest rate changes.
D)  Short-term U.S.treasury bills.
E)  More liquid than cash.F) A) and B)
G) A) and C)

Question 15

A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

Accepted Answer

A) True 
 B)False

Question 16

Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

Accepted Answer

A) True 
 B)False

Question 17

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling,general and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 18

Internal control procedures for cash receipts do not require that:

Accepted Answer

A)  Custody over cash is kept separate from its recordkeeping.
B)  All collections for sales are received immediately upon making the sales.
C)  Clerks having access to cash in a cash register should not have access to the register tape or file.
D)  An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.
E)  Cash sales should be recorded on a cash register at the time of each sale.F) C) and E)
G) A) and E)

Question 19

Cash,not including cash equivalents,includes:

Accepted Answer

A)  Postage stamps.
B)  Customer checks,cashier checks,and money orders.
C)  IOUs.
D)  Two-year certificates of deposit.
E)  Money market funds.F) A) and C)
G) B) and E)

Question 20

A bank statement provided by the bank includes:

Accepted Answer

A)  A list of outstanding checks.
B)  A list of petty cash amounts.
C)  The beginning and the ending balance of the depositor's account.
D)  A listing of deposits in transit.
E)  A reconciliation to the depositor cash account.F) A) and E)
G) A) and B)

Exam 6: Reporting and Analyzing Cash,fraud,and Internal Control

A receiving report is a document used within a company to notify the appropriate persons that ordered goods have been received and to describe the quantities and condition of the goods.

Correct AnswerverifiedShow Answer

A properly designed internal control system:

Correct AnswerverifiedShow Answer

Cash equivalents meet all of the following criteria except:

Correct AnswerverifiedShow Answer

Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

Correct AnswerverifiedShow Answer

The clerk who has access to the cash in the cash register should also have access to the cash register tape or file.

Correct AnswerverifiedShow Answer

Cash,not including cash equivalents,includes:

Correct AnswerverifiedShow Answer

Outstanding checks,deposits in transit,and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

Correct AnswerverifiedShow Answer

Great Falls Co.'s bank reconciliation as of February 28 is shown below. One of the adjusting journal entries that Great Falls must record as a result of the bank reconciliation includes:

Correct AnswerverifiedShow Answer

Internal control in technologically advanced accounting systems depends less on the design and operation of the information system and more on the analysis of its resulting documents.

Correct AnswerverifiedShow Answer

Internal control procedures for cash receipts do not require that:

Correct AnswerverifiedShow Answer

The use of internal controls provides a guarantee against losses due to operating activities.

Correct AnswerverifiedShow Answer

Which of the following events would cause a bank to debit a depositor's account?

Correct AnswerverifiedShow Answer

The entry to record reimbursement of the petty cash fund for postage expense should include:

Correct AnswerverifiedShow Answer

A bank statement provided by the bank includes:

Correct AnswerverifiedShow Answer

Two clerks sharing the same cash register is a violation of which internal control principle?

Correct AnswerverifiedShow Answer

If the Cash Over and Short account has a credit balance at the end of the period,the amount is commonly reported as miscellaneous revenue.

Correct AnswerverifiedShow Answer

At the end of the current period,a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable.Calculate this company's days' sales uncollected at the end of the current period.

Correct AnswerverifiedDays' Sales Uncollected Ratio ...View AnswerShow Answer

Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

Correct AnswerverifiedShow Answer

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:

Correct AnswerverifiedShow Answer

A debit balance in the Cash Over and Short account reflects an expense and is reported on the income statement as part of selling,general and administrative expenses.

Correct AnswerverifiedShow Answer

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Days' Sales Uncollected Ratio ...
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