Accounting Ch 8 Exam

Which of the following illustrates the internal control procedure-separation of​ duties? A. Electronic devices must be installed to reduce theft. B. Cashiers must not have access to accounting records. C. External auditors will monitor internal controls. D. The invoices and other documents must be​ pre-numbered.

B. Cashiers must not have access to accounting records.

The petty cash fund had an initial imprest balance of $ 220. It currently has $ 15 in​ cash, $ 4 in miscellaneous petty cash​ tickets, and an additional ​$193 in specific petty cash tickets. The debit to Cash Short​ & Over would be​ ________ .A. $ 8 B. $ 193 C. $ 197 D. $ 15

.A. $ 8

In a good internal control​ system, which of the following sets of documents is required for proper approval of a payment to a​ supplier? A. a supplier​ invoice, a bill of​ lading, and the​ supplier's financial statements B. a receiving​ report, an​ invoice, and a purchase order C. a journal​ entry, a supplier​ invoice, and a description of the goods being purchased D. a purchase​ order, a journal​ entry, and a price catalog

B. a receiving​ report, an​ invoice, and a purchase order

Which of the following is a requirement of the​ Sarbanes-Oxley Act? A. An outside auditor must evaluate the​ client's internal controls and report on the internal controls as part of the audit report. B. The Public Company Accounting Oversight Board must conduct audits of public companies. C. The Public Company Accounting Oversight Board must create new accounting standards. D. The accounting firm that audits a public client must also provide consulting services for the same client.

A. An outside auditor must evaluate the​ client's internal controls and report on the internal controls as part of the audit report.

Which of the following is not part of the definition of internal​ control? A. Separation of duties B. Safeguard assets C. Encourage employees to follow company policies D. Promote operational efficiency

A. Separation of duties

Encryption A. rearranges messages by a special process. B. creates firewalls to protect data. C. cannot be broken by hackers. D. avoids the need for separation of duties.

A. rearranges messages by a special process.

The​ Sarbanes-Oxley Act A. requires that an outside auditor must evaluate a public​ company's internal controls. B. allows accountants to audit and to perform any type of consulting work for a public company. C. stipulates that violators of the act may serve 20 years in prison for securities fraud. D. created the Private Company Accounting Board.

A. requires that an outside auditor must evaluate a public​ company's internal controls.

Michelle Darby receives cash from customers. Her other assigned job is to post the collections to customer accounts receivable. Her company has weak A. separation of duties. B. assignment of responsibilities. C. computer controls. D. ethics.

A. separation of duties.

Which of the following is an attribute of the internal control procedure-​competent, ​reliable, and ethical​ personnel? A. the need to train and supervise employees B. providing cross training to allow sales personnel to record revenue transactions C. monitoring of internal controls by external auditors D. purchase of burglar alarms

A. the need to train and supervise employees

Which of the following items must be examined by the controller or treasurer before signing a​ check? A. the purchase order B. the ledger C. the journal entry D. the confirmation report

A. the purchase order

The Cash account of First on Alert Security Systems reported a balance of $2,560 at December 31​, 2018. There were outstanding checks totaling $1,800 and a December 31 deposit in transit of $400. The bank​ statement, which came from Park Cities​ Bank, listed the December 31 balance of $4,520. Included in the bank balance was a collection of $570 on account from Nicole Lee​, a First on Alert customer who pays the bank directly. The bank statement also shows a $30 service charge and $20 of interest revenue that First on Alert earned on its bank balance. Prepare First on Alert​'s bank reconciliation at December 31. Answers are in the *'s*

Bal: *4520* Add: *Deposit in transit* *400* *4920* Less: *Outstanding checks* *1800* *1800* Adjusted bank balance *3120* Book Balance *2560* Add: *Bank collection* *570* *Interest revenue* *20* *590* *3150* Less: *Service Charge* *30* *30* Adjusted book bal *3120*

Which of the following describes the risk assessment component of internal​ control? A. Risk assessment is designed to ensure that the​ business's goals are achieved. B. Risk assessment is the​ "tone at the​ top" of the business. C. A company must identify its risks and take necessary steps to minimize them. D. Internal auditors monitor company controls to safeguard​ assets, and external auditors monitor the controls to ensure that the accounting records are accurate.

C. A company must identify its risks and take necessary steps to minimize them.

Which of the following describes the environment in internal​ control?A. Internal auditors monitor company controls to safeguard​ assets, and external auditors monitor the controls to ensure that the accounting records are accurate. B. A company must identify its risks. C. The environment is designed to ensure that the business earns profit. D. The environment is the​ "tone at the​ top" of the business.

D. The environment is the​ "tone at the​ top" of the business.

Which of the following components of internal control consist of work performed by internal and external​ auditors?A. control environment B. information systems C. control procedures D. monitoring of controls

D. monitoring of controls

Separation of duties is important for internal control of A. cash receipts. B. cash payments. C. Neither of the above D. Both a and b

D. Both a and b

Which of the following is the basic internal control procedure with respect to cash​ receipts? A. requiring customers to pay with debit or credit cards B. requiring the accountants to make the bank deposits C. preventing collusion D. depositing all cash receipts in the bank shortly after the cash is received

D. depositing all cash receipts in the bank shortly after the cash is received

Karen's Dance Studio created a $270 imprest petty cash fund. During the​ month, the fund custodian authorized and signed petty cash tickets as​ follows: (Delivery Expense $25 Postage Expense $10 Printing Expense $20 Miscellaneous Expense $55 Office Supplies $60) 3. Assume that Karen's Dance Studio decides to decrease the petty cash fund to $140. Make the general journal entry to record this decrease.

Debit: Cash 130 Credit: Petty Cash 130 Explanation: To decrease the petty cash fund.

Karen's Dance Studio created a $270 imprest petty cash fund. During the​ month, the fund custodian authorized and signed petty cash tickets as​ follows: (Delivery Expense $25 Postage Expense $10 Printing Expense $20 Miscellaneous Expense $55 Office Supplies $60) 1. Make the general journal entry to create the petty cash fund. Include explanation.

Debit: Petty Cash 270 Credit: Cash 270 Explanation: To open the petty cash fund.

Karen's Dance Studio created a $270 imprest petty cash fund. During the​ month, the fund custodian authorized and signed petty cash tickets as​ follows: (Delivery Expense $25 Postage Expense $10 Printing Expense $20 Miscellaneous Expense $55 Office Supplies $60) 2. Make the general journal entry to record the petty cash fund replenishment. Cash in the fund totals $90. INclude an explanation.

Debits: Delivery expense 25 Postage expense 10 Printing expense 20 Miscellaneous Expense 55 Office Supplies 60 Cash short and Over 10 Credit: Cash 180 Explanation: To replenish the petty cash fund.