3.06 Chapter 6 Connect SmartBook

Which of the following are principles of internal control? (Check all that apply.)

-Divide responsibility for related transactions -Perform regular and independent reviews -Maintain adequate records -Establish responsibilities

All of the following describe blockchain: (Check all that apply.)

-blockchain makes it more difficult for the ledger to be modified without a detailed record of changes -blockchain is continuously and simultaneously updated and verified

Which of the following are correct regarding why management uses internal controls?

-protect assets . -ensure reliable accounting. -promote efficient operations. -uphold company policies.

Each of the following are types of technological impacts related to internal control: (Check all that apply.)

-reduced processing errors -more extensive testing of records -separation of duties -new evidence of processing

Identify the principles of internal control by selecting the correct answers below. (Check all that apply.)

1. Separate recordkeeping from custody of assets .2. Apply technological controls. 3. Establish responsibilities 4. Insure assets 5. Perform regular and independent reviews 6. Maintain adequate records.

Human (error/fraud) is related to misjudgment or confusion. Human (error/fraud) involves intent to defeat internal controls for personal gain.

Blank 1: error Blank 2: fraud

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n) (entry/charge/report) explaining any differences between the (checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the (income/financial/bank) statement.

Blank 1: report Blank 2: checking Blank 3: bank

Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below. (Check all that apply.)

Cash receipts are promptly deposited in a bank. Handling cash is separate from recordkeeping of cash. Cash payments are made by check.

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the following entries is correct to record cash sales and the shortage.

Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

Match the banking term on the left with its definition on the right.

Deposit ticket - lists currency coins and checks deposited into an account check - a document signed by the depositor instructing the bank to pay a specified amount of money bank account - used to deposit money for safekeeping and help control withdrawals remittance advice -explains the reason for payment electronic funds transfer - electronic transfer of cash form one party to another

Which of the statements below describe the goals and principles of cash management? (Check all that apply.)

Encourage quick collection of receivables. Money should be spent only when it is available. Keep a minimum level of cash necessary to operate. Plan cash receipts to meet cash payments when due.

Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)

Ending period balance in the account Deposits and other increases to the depositor's account during the period Withdrawals and other decreases to the account during the period Beginning period balance in the depositor's account

Internal control policies and procedures have limitations that arise from many elements. Match the limitation on the left with its definition on the right. Instructions

Human error- can occur from carelessness misjudgment or confusion Human fraud- Involves intent by people to defeat internal controls for personal gain Cost-benefit principle- dictates that the costs of internal controls must not exceed their benefits internal control environment - management must convey commitment to internal control policies and procedures

Review the following statements and select the ones which accurately describe a Petty Cash fund. Select all answers which apply.

It is established to pay for small payments like low-cost supplies and shipping fees, etc. It is an asset reported on the balance sheet.

Identify the statement below that describes what the Days' sales uncollected ratio assesses.

It measures how quickly a company can convert its accounts receivables into cash

Identify which of the items below are goals of good cash management. (Check all that apply.)

Keep a minimum level of cash necessary to operate. Plan cash receipts to meet cash payments when due.

Which statement below explains why liquid assets are needed in a business?

Liquid assets must be available to pay current liabilities.

Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)

Technology has reduced the number of processing errors. Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft.

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy.

The extra $5 collected will be treated as a miscellaneous revenue. The Cash Over and Short account will be credited for $5. The Cash account will be debited for $105. The Sales account will be credited for $100

Determine which of the statements below is correct regarding information reflected on a monthly bank statement

The information on the bank statement reflects the bank's records of the depositor's account

Determine the statements below that are true regarding why a bank reconciliation is used.

Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation .The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two.

A good internal control to protect cash is to make cash payments using

checks

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its liabilities.

current

Auditors focus more on testing the Blank______ of a company's blockchain processes and technology than on verifying the Blank______ of its output.

effectiveness/accuracy

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for (large/small) payments.

small

What is the purpose of internal controls?

to protect assets and ensure reliable accounting

Determine which of the statements below accurately describe services provided by a bank. (Check all that apply.)

A bank account is a record set up by a bank for a customer. To withdraw money from an account, the depositor can use a check. Each bank deposit is supported by a deposit ticket.

The following annual account balances are taken from ABC Co at year end Select the statements below that are correct regarding ABC Co.'s ability to collect its receivables from customers. (Check all that apply.)

ABC Co. has shortened the amount of time it takes to collect receivables from customers from 1 year ago to the current year. ABC Co. has shortened the amount of time that money is tied up in receivables from 1 year ago. ABC Co. took approximately 31 days to collect cash from its credit customers in the current year.