Accounting Chapter 4
What requirements for corporate accountability are included in the Sarbanes-Oxley Act?
-Corporate executives must personally certify the financial statements -Corporate executives may be criminally liable for fraudulent financial statements
What would cause a bank statement not to agree with the cash balance in the accounting records?
-The bank made an error in recording a deposit made by the company. -The company made an error in recording a deposit. -The bank paid interest that the company has not recorded. -Deposits outstanding that have been recorded on the company's records, but not on the bank's.
Which of the following items are included in cash?
-coins and cash -checks -current checking account balance
The three elements present in the fraud triangle are:
-opportunity -motivation -rationalization
Internal controls
A company's plans to (1) safeguard the company's assets and (2) improve the accuracy and reliability of accounting information
Risk assessment
Identifies and analyzes factors that could prevent objectives from being achieved
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?
It would be deducted from the bank balance.
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? Is it added or subtracted from the bank balance or the company's cash (book) balance?
It would be deducted from the company balance.
Which of the following items will require a journal entry following a bank reconciliation?
Notes collected by the bank NSF checks
The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the
Sarbanes-Oxley Act.
When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?
Service charges Charges for NSF checks
Who is responsible for providing an opinion on management's assessment of internal control?
The company's auditors
In a bank reconciliation, a deposit outstanding is
added to the bank balance.
In a bank reconciliation, interest revenue earned on a company's bank account is:
added to the company's cash balance
A check that is NSF (nonsufficient funds) is a check that
cannot be paid because the account does not contain enough funds.
The asset most susceptible to fraudulent activity is(are)
cash
A bank reconciliation reconciles the bank statement with the company's
cash account in the balance sheet.
Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called
checks outstanding.
The Sarbanes-Oxley Act applies to
companies that are required to file with the SEC.
Lindell sells $100 of goods to a customer. The customer pays with a personal check. Recording this transaction will include a
debit cash
In a bank reconciliation, an outstanding check is ______.
deducted from the bank balance
Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are
deposits outstanding.
An ___ is a mistake in accounting, which can be intentional or unintentional
error
When a person intentionally deceives another person or company for personal gain, this is referred to as
fraud
Monitoring
includes formal procedures for reporting control deficiencies
Separation of duties requires that
individuals who have physical responsibility for assets should not have access to accounting records.
Who has final responsibility for internal controls?
managers
The acronym NSF stands for
nonsufficient funds.
The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called
occupational fraud
The element of fraud which is easiest for companies to eliminate is
opportunity
Which of the following are preventive controls?
physical controls, separation of duties
One of the most important internal controls for cash is the bank
reconciliation
Internal control consists of plans to
safeguard company assets. provide accurate and reliable accounting information.
A petty cash fund is used for
small amounts of cash needed for low-cost items.
An ___ difference in cash occurs when a company records a transaction either before or after the bank records the same transaction. (Enter only one word.)
timing
A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to
timing differences and errors.
Joyce Inc. sells $5,000 of goods to a customer. The customer pays with a VISA credit card. VISA charges a 3% fee on the sale. Recording the sale would include which of the following?
-Credit Sales $5,000 -Debit Service Fee Expense $150 -Debit Cash $4,850
In a bank reconciliation, which of the following will require a journal entry by the company?
Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books
When adjusting the company's cash account balance in a bank reconciliation, which item must be added to the cash account balance?
Collections of funds by the bank
Formal policies related to management's philosophy, assignment of responsibilities, and organizational structure
Control environment
Who must personally certify the financial statements and company disclosures or risk financial penalties and criminal prosecution for fraudulent misstatements?
Corporate executives
When adjusting the bank balance in a bank reconciliation, which item must be subtracted from the bank balance?
Outstanding checks
Control activities
Policies and procedures that help ensure management's directives are being carried out
Separation of duties and E-commerce controls are examples of ______ controls.
Preventative
What is the primary purpose of a bank reconciliation?
To ensure the bank balance per reconciliation is equal to the company balance per reconciliation
A non-sufficient funds check requiring an adjustment to the cash balance was written:
to the company preparing the bank reconciliation
Since debit cards withdraw funds directly from the cardholder's bank account at the time of use, a sale on a debit card is most similar to a sale
with a check.
A debit card
withdraws funds immediately from the cardholders' bank account.