Chapter 6 Financial Accounting
Comparing two sets of records is called ______.
reconciling
The 3 categories of employee fraud are ______. (Select all that apply.)
- asset misappropriation - financial statement fraud - corruption
Bank reconciliations are needed to reconcile for ______. (Select all that apply.)
- deposits in transit - outstanding checks
How do banks help businesses control cash? (Select all that apply.)
- documenting procedures - independently verifying - restricting access to cash
A check that you have written has cleared the bank when ______.
funds have been withdrawn from your bank account to cover the check
Outstanding checks are checks that ______.
have been written but have not yet cleared the bank
A bank reconciliation is a(n) ______.
internal report prepared to compare the company's cash records with the bank statement
Restricted cash is reported ______.
separately as an asset on the balance sheet
A company has a $8,000 cash balance per its books. The bank statement has a balance of $8,450. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, EFTs of $1,000 were received from customers, a $200 NSF check from a customer, and a $50 bank service charge. Given the above reconciling items, the up-to-date cash balance equals .
$8,750
Banks provide important controls surrounding a company's cash. These include which of the following? (Select all that apply.)
- Banks provide statements that are used for independent verification. - Banks restrict access. - Banks provide documentation.
The principles underlying the internal control system include ______. (Select all that apply.)
- segregating duties - restricting access - documenting procedures - independently verify - establishing responsibility
Internal control for cash is important because ______. (Check all that apply.)
- the risk of cash-handling errors is significant - of the high risk of theft - of the large volume of cash transactions - cash is portable and is "owned" by whomever possesses it
To segregate duties involving cash receipts, specific responsibilities are assigned to various employees. Put the following steps in the correct chronological order listing the first step at the top.
1. Cashiers are responsible for collecting cash and issuing a receipt at the point of sale. 2. A supervisor is responsible for collecting the cash at the end of each cashier's shift. correct toggle button unavailable A supervisor is responsible for collecting the cash at the end of each cashier's shift. 3. Members of the accounting department are responsible for ensuring that cash sales are properly recorded. correct toggle button unavailable Members of the accounting department are responsible for ensuring that cash sales are properly recorded.
Deposits in __________ are added to the _________ (bank/book) side of the bank reconciliation. (Enter one word per blank.)
1. Transit 2. Bank
Cash ______ are short-term, highly ______ investments purchased within ______ of maturity.
1. equivalents 2. liquid 3. 3 months
When a check is presented to a bank for payment and the amount is deducted from the payer's account, the check is said to have __________ the bank.
Cleared
____________ of duties is essential for safeguarding assets. The person who has custody of an asset should not also account for the asset. A person who performs both duties can steal the asset and hide the theft by making a bogus entry in the accounting records. (Enter one word per blank.)
Segregation
A(n) ______ is a collection of documents prepared in the process of approving, processing and documenting all purchases and payment made on account.
Voucher
A(n) ______ system involves the processing of purchases and payments made on account.
Voucher
Deposits in transit are ______ on a bank reconciliation.
added to the bank balance
Outstanding checks have already been ______.
deducted from your cash balance per your books but not the bank balance
A company has a $10,000 cash balance per its books. The bank statement has a balance of $9,580. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, a $100 NSF check from a customer, and a $20 bank service charge. Given the above reconciling items, the up-to-date cash balance equals .
$9,880
The (__________) (__________) system consists of actions taken to promote efficient and effective operations, protect assets, enhance accounting information and adhere to laws and regulations. (Enter only one word per blank.)
1. Internal 2. Control
True or false: Strong internal control surrounding cash receipts requires the cashier to perform the following procedures: count the cash receipts, take the cash to the bank, and record the amount collected in the accounting records.
False
Which of these are cash equivalents? (Check all that apply.)
- Investments within 3 months to maturity - Money market funds
Which of the following are typical reconciling items on the book side of a reconciliation because the company did not know about these items until it got the bank statement? (Select all that apply.)
- Interest income - Electronic funds transfers - Services charges