AC 210 CH 5 Learn Smart

Which of the following are elements of good internal control over cash receipts?

A different employee deposits the cash at the bank, Cash receipts are summarized and their total is calculated, Two employees cannot share the same cash drawer

Paying by check helps a business to control cash when the ______

manager studies the documents supporting the payment before signing the check checks are, prenumbered and written sequentially

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered _____ that identifies the supplier, the delivery location, and the approved quantity and cost.

purchase order

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered ____________ that identifies the supplier, the delivery location, and the approved quantity and cost.

purchase order

A bank ____ is an internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash

reconciliation

Which of the following duties should not be the responsibility of an employee who has access to cash?

record cash collected in the journal, perform bank reconciliations

This document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records.

supplier invoice

A(n) ______ is a collection of documents prepared in the process of approving, processing and documenting all purchases and payment made on account.

voucher

Deposits in transit have already been ____

added to your cash balance per your books and not to the bank balance

deposits in transit occur when you make a deposit ____

after the bank's normal business hours

Which of the following reconciling items on a bank reconciliation need to be recorded in the company's record to adjust its cash balance so that it up to date?

Customer's check rejected by the bank as NSF, EFT received from customers discovered on the bank statement, Interest Revenue

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

Employee ______ is often grouped into 3 categories: corruption, asset misappropriation, financial statement fraud.

fraud

Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act?

increase rationalization (correct: reduce opportunities for fraud, counteracts incentives for fraud, and encourages good behavior)

Which is the control component of an internal control system that refers to the attitude of employees in the organization?

control environment

Which of the following control components are part of the framework used when analyzing an internal control system?

control environment, risk assessment, information and communication, control activities, monitoring activities

This month's bank statement includes a check from a customer that was marked NSF. How would this item be treated on the bank reconciliation?

deducted from the book balance

If the company's accountant mistakenly recorded a $58 deposit as $85, the error would be shown on the bank reconciliation as a(n) ______

$27 deduction from the book balance

A(n) ______ system involves the processing of purchases and payments made on account

voucher

This month's bank statement shows interest earned of $45. How would this item be treated on the bank reconciliation?

it would be added to the book balance

The document that indicates the date, quantity, and condition of the goods is called a _________ report. It is then sent to the accounting department to notify that the purchase can be recorded.

receiving

This document indicates the date, quantity, and condition of the goods. It is then sent to the accounting department to notify the purchase can be recorded.

receiving report

Good internal control over cash requires cashiers to _____

restrict access to the cash register, give a cash register receipt to every customer

The services provided by a bank help business control cash by ______

restricting access and providing documentation and independent verification

The ______ component in a system of internal controls refers to evaluation the potential for fraud

risk assessment

A check that you have written has cleared the bank when _____

funds have been withdrawn from your bank account to cover the check

NSF checks are the same as

-bounced checks -non sufficient funds checks

Which of the following responsibilities should not be given to the accounting department?

Preparing the purchase requisition, Preparing the purchase order, Preparing the receiving report

In a bank reconciliation, the electronic funds transfer (EFT) received by the bank from a customer's note receivable owed to the company is _____

added to the book balance

One of the components of an internal control system is the control environment which refers to the ______

attitude employees hold regarding internal control

NSF checks from customers should be subtracted from the ______ balance on a bank reconciliation

book

Which of the following poses a high risk of theft because of its high volume and ease of portability?

cash

What are reasons internal controls can never completely prevent and detect errors and fraud?

collusion, human error, costs exceed benefits

Which of the following is not an accurate statement about internal control?

it guarantees the management will behave ethically

Which of the following is subtracted from the bank balance on a bank reconciliation?

outstanding checks

On a bank reconciliation, which of the following are typical reconciling items the bank would not know about because of time lags?

outstanding checks, deposits in transit

______ checks written by the company that have not cleared the bank are subtracted from the ______ balance on a bank reconciliation.

outstanding, bank

The risk assessment component in a system of internal controls refers to the assessment of the ______

potential for fraud

A bank ______ is an important control because it provides independent verification of all cash transactions the bank has processed for the company. This internal report should be prepared by an employee whose duties are separate from recording and handling of cash.

reconciliation

The purchasing system begins with an authorized employee completing a manual or electronic purchase _____ form which is then reviewed and approved by a supervisor before an order is placed with a supplier.

requisiton

Deposits in _____ are added to the _____ (bank/book) side of the bank reconciliation.

transit, bank

One of the components of an internal control system is "control activities" which refers to the activities ______

completed by employees to reduce risks to an acceptable level

This month's bank statement shows that the bank incorrectly credited ABC Corp.'s account for a $600 deposit that should have been credited to XYZ Corp.'s account. How would this item be treated on ABC's bank reconciliation?

deducted from the bank balance

Outstanding checks have already been ____

deducted from your cash balance per your books but not the bank balance

Outstanding checks have already been _____

deducted from your cash balance per your books but not the bank balance

A bank service charge should be a(n) ______ on a bank reconciliation

deduction from the book balance

Bank reconciliations are needed to reconcile for ______

deposits in transit, outstanding checks

A _____ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts

direct

The principles underlying the internal control system include ______

independently verify, restricting access, establishing responsibility, segregating duties, documenting procedures

The supplier ______ is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records.

invoice

The purchasing system begins with an authorized employee completing a manual or electronic ______ which is then reviewed and approved by a supervisor before an order is placed with a supplier

purchase requisition

Cashiers at a supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

segregating duties

What would cause a bank statement not to agree with the cash balance in the accounting records?

the bank error in recording a deposit made by the company, the bank paid interest that the company has not recorded, deposits outstanding that have been recorded on the company records,but not the banks, the company made an error in recording a deposit

Which of the following are limitations in internal control systems?

A control may not be implemented because the cost of the control may exceed the benefit of reducing the fraud or potential errors, Collusion can exist making it impossible to completely prevent fraud.

Banks provide important controls surrounding a company's cash. These include which of the following?

Banks provide statements that are used for independent verification, Banks provide documentation, Banks restrict access.

True or false: The person who has custody of an asset should also account for the asset. A person who performs both duties will best know what the balance should be in the accounting records

false (Segregation of duties is essential to safeguarding a company's assets. The person who has access to assets should not have access to the accounting records)

A $250 bank deposit made on the last day of the month did not appear on this month's bank statement. How would this item be treated on the bank reconciliation?

it would be added to the bank balance

The ______ component of an internal control system refers to the activities completed by employees to reduce risks to an acceptable level.

control activities

An effective internal control system ______

is monitored to detect and communicate deficiencies to those responsible, generate and communicate information to support sound decision making, is monitored regularly to determine whether controls are working as intended

The ______ component of an internal control system refers to the evaluation of internal controls to identify deficiencies.

monitoring activities

Internal control for cash is important because _____

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