ACCT 2110 Cornett Exam 3

Cash collected and recorded by a company but not yet reflected in a bank statement are known as a. debit memos. b. deposits in transit. c. credit memos. d. outstanding checks.

B

Which of the following procedures is not part of the preparation of a bank reconciliation for a checking account? a. Comparing canceled checks returned with the bank statement to the cash account to identify outstanding checks b. Looking for bank services charges and other items on the bank statement that have not yet been included in the cash account. c. Comparing deposits listed on the bank statement to the cash account to identify deposits in transit d. Reversing all the transactions recorded on the company's records that do not yet appear on the bank statement.

D

T/F An accounting system must be computerized in order to ensure the company has proper internal control.

False

T/F If a company hires honest employees and its top management acts with integrity, *no* internal control procedures will be necessary.

False

T/F On a bank reconciliation, outstanding checks are added to the cash balance per the bank statement.

False

T/F The best response to an employee caught stealing from the company is to say, "Don't ever let me catch you doing that again!"

False

T/F A debit memo may be issued in the monthly bank statement in order for the bank to notify a company that a service charge has been assessed on the company's account.

True

T/F As part of a sound system of internal controls, all disbursements (with the exception of petty cash) should be made by check.

True

T/F Internal control over financial reporting is concerned with ensuring the reliability of the financial statements.

True

T/F The stronger the system of internal control, the higher the accuracy of the company's accounting records and financial reports.

True

Five components of an internal control system

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