Accounting 1 ch 8

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. (Check all that apply.)

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

Determine which of the items below would appear in the Deposits column of a bank statement and would cause an increase in the account's balance.

-A note collected by the bank on behalf of the account owner Interest paid by the bank on the bank account balance Deposits made during the month

Responsibility for a task should be clearly established and assigned to:

1 person

Select the statements below that are correct regarding ABC Co.'s ability to collect its receivables from customers.

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

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

Beginning-of-period balance in the account Deposits and other increases to the account during the period End-of-period balance in the account Withdrawals and other decreases to the account during the period

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

Summarize the internal control principle of establishing responsibility by completing the following sentence. Proper internal control means that responsibility for a (task/shortage/sale) is clearly (posted/established/compensated) and assigned to one person.

Blank 1: task Blank 2: established

Review the items below and determine which would cause an increase in the monthly bank statement balance.

Cash deposits made by the account owner

Recall the preparation of a bank reconciliation by selecting the correct items below. (Check all that apply.)

Compute the adjusted bank balance. Compute the adjusted book balance. Add deposits in transit to the bank balance. Subtract any outstanding checks from the bank balance.

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.

Which of the following are principles of internal control?

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

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.

Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below.

Keeping detailed records makes it unlikely that assets are lost or stolen without detection. Reliable records are a source of information that managers use to monitor activities.

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

Liquid assets must be available to pay current liabilities.

Describe the purpose of a purchase requisition by selecting the correct answer below. (Check all that apply.)

Managers are not allowed to place orders directly with vendors; instead, they fill out a purchase requisition. Purchase requisitions are used to inform the purchasing department of its needs. Purchase requisitions are used for control purposes.

Choose the items below that would be subtracted from the book balance on a bank reconciliation. (Check all that apply.)

Monthly bank service charge NSF customer check Monthly check charges assessed by the bank

Identify the item below that would be subtracted from the book balance on a bank reconciliation.

NSF check

Select the items below that would cause the bank statement balance to differ from the depositor's book balance.

NSF check, Deposit in transit, interest paid by bank

Choose the items below that would increase the book balance on a bank reconciliation. (Check all that apply.)

Note collected by the bank for the depositor Interest earned on the depositor's account

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

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

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

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

Which of the statements below explains how technology has impacted internal control systems?

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. Technology has reduced the number of processing errors.

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.

The adjusted bank balance must equal the adjusted cash balance per books.

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business.

The petty cashier is responsible for making payments from the petty cash fund. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time. A check is drawn by the company cashier to establish the petty cash fund. The petty cashier is responsible for keeping the cash in the fund safe.

Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)

Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. 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. The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.

All of the following describe blockchain:

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

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 ____ of a company's blockchain processes and technology than on verifying the ___ of its output.

effectiveness/accuracy

Good recordkeeping helps protect assets and helps managers:

monitor company activities

Each of the following are types of technological impacts related to internal control:

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

True or false: The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled.

true

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

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

What is the purpose of internal controls?

to protect assets and ensure reliable accounting

Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period.

-The balance sheet would show an overstated cash asset. -The income statement would reflect a net income amount that was too high. -Expenses would not be recorded in the period in which they were incurred.

Determine which of the statements below accurately describe services provided by a bank.

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

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. Each bank deposit is supported by a deposit ticket. To withdraw money from an account, the depositor can use a check.

Identify the principles of internal control by selecting the correct answers below.

Perform regular and independent reviews. Maintain adequate records. Establish responsibilities. Separate recordkeeping from custody of assets. Insure assets. Apply technological controls.