Chapter 5: Smartbook

Describe what a voucher system is by selecting the correct statement below.

A voucher system is a set of procedures and approvals designed to control cash payments.

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.

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

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

In addition to the cashier and clerk who have access to the cash, a third employee should have access to

In addition to the cashier and clerk who have access to the cash, a third employee should have access to

Which statement below describes the internal control procedure of insuring assets and bonding key employees? Insuring assets against casualty and bonding employees who handle cash, reduces risk of loss. Bonding employees and insuring assets increases the risk of loss. Insuring assets and bonding employees makes it unlikely that a theft is uncovered. Insuring assets has a cost that outweighs the risk of loss.

Insuring assets against casualty and bonding employees who handle cash, reduces risk of loss.

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

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

Which of the answers below correctly describe the Cash Over and Short account? (Check all that apply.)

It records the effects of cash overages and cash shortages. A debit balance reflects an expense. It is an income statement account.

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.

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.

Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below. Dividing responsibility for related transactions reduces the occurrence of recordkeeping errors. Reliable records are a source of information that managers use to monitor activities. Bonding employees reduces the risk of loss. Keeping detailed records makes it unlikely that assets are lost or stolen without detection.

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.

Identify the examples of good internal control designed to protect over-the-counter cash receipts. (Check all that apply.)

The clerk and the cashier have access to cash, but not to the accounting records. Clerks should be required to give the customer a receipt for each sale.

Regular and independent reviews should be done by --------

auditors not directly involved in the activities

Good recordkeeping helps protect assets and helps managers:

monitor company activities

An ID scanner is a type of _______control.

technological or technology

Cash equivalents include short term investments within

three months of their due date/90 days

What is the purpose of internal controls? to protect assets and ensure reliable accounting to guarantee that loss is eliminated to reduce outstanding customer balances as a basis of employee performance reviews

to protect assets and ensure reliable accounting

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

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

Determine which of the statements below describes a petty cash receipt. (Check all that apply.)

A petty cash receipt is sometimes called a petty cash ticket. A petty cash receipt will have a signature line for the person receiving a payment from the fund. The petty cashier must present all paid receipts to the company cashier in order to replenish the fund. Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt.

Given the choices below, choose the examples of internal controls designed to control cash payments. (Check all that apply.)

All payments should be made by check. Use of a voucher system. Use of a petty cash system. Only authorized individuals should be allowed to sign checks.

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.)

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

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.

Which of the statements below explains the internal control principle of performing regular and independent reviews?

Regular reviews of internal control systems are needed to ensure that procedures are followed.

Which of the statements below describes the internal control principle of applying technological controls?

Technological controls, such as time clocks and cash registers, improve the effectiveness of controls.

True/False An owner of a small business usually knows if the business is receiving the assets and services the company paid for.

True

Regular and independent reviews should be done by ______.

auditors not directly involved in the activities

Describe the internal control principle of separating recordkeeping from custody of assets by completing the following sentence. A person who ______(identifies/controls/recommends) or has access to an asset must__________(always/not/) keep that asset's accounting records.

controls not

Choose the list below that contains only cash or cash equivalents.

customer checks, money orders, certified checks

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

effectiveness/accuracy

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.

established assigned

A person who has access to an asset must______ access to that asset's accounting records.

not have/control not

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

one person

The triple threat of fraud involves: (Check all that apply.)

rationalization opportunity pressure

When cash is received by mail, a list should be prepared with copies sent to all of the following: (Check all that apply.)

recordkeeper with the cash receipts to the cashier the person who opened the mail

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

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

Bonding employees who handle cash is important because it:

reduces risk of theft

The internal control of__________ of duties means that the responsibility for a transaction should be divided between two or more individuals.

separation or segregation choose one only if not it is going to mark it incorrectly.

Identify the examples of good internal controls designed to protect cash received in the mail. (Check all that apply.)

Two people are assigned the task of, and are present for, opening the mail. The recordkeeper and the person who reconciles the bank balance do not have access to cash.

Identify when the Petty Cash fund is debited or credited by selecting the correct answer below. (Check all that apply.)

When the account is increased When the account is created When the account is reduced

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

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

Which of the following are principles of internal control? (Check all that apply.) Reduce vendor payables. Establish responsibilities. Maintain adequate records. Perform regular and independent reviews. Increase revenues. Divide responsibility for related transactions.

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

Which statement below describes the internal control procedure of insuring assets and bonding key employees?

Insuring assets against casualty and bonding employees who handle cash, reduces risk of loss.

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

Liquid assets must be available to pay current liabilities.

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

Maintain adequate records Establish responsibilities Insure assets Apply technological controls Separate record keeping from custody of assets-Perform regular and independent reviews

Review the following statements regarding a petty cash fund used in a business and select the one that is correct.

Only the petty cashier is responsible for paying cash from the fund.

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

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

Describe the internal control principle of dividing responsibility for related transactions by selecting the correct statements below. Multiple select question.

This principle helps to make sure that the work of one individual acts as a check on another individual's work on a related transaction. Examples of transactions with divided responsibility are placing inventory orders and paying vendors. This principle is often called separation of duties.

What is the purpose of internal controls? Managers utilize internal controls as a basis of employee performance reviews. To help managers know if the business is receiving the assets and services it has paid for. Companies use strong internal controls to guarantee that loss is eliminated. Internal controls are used by managers as a way to reduce outstanding customer balances.

To help managers know if the business is receiving the assets and services it has paid for.

All of the following describe blockchain:

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

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