Chapter 4 - ACTG 2200

The two types of control procedures are preventive and _____________.

detective

A periodic performance review is an example of a(n) _________ control.

detective or internal

The amount of cash in the balance sheet reflects the

ending cash on the balance sheet date.

Preparation of a ________ bank helps maintain control of cash accounts.

reconciliation

One of the most important internal controls for cash is the bank

reconciliation or recon

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

- Opening the mail and deposit of checks in the bank - Depositing checks into the bank and recording receipts in the accounting records

internal controls

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?

Charges for NSF checks Service charges

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's:

balance sheet statement of cash flows

The asset that is most susceptible to employee fraud is

cash.

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.

Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n) ___________ ___________.

current, short-term, short term, or shortterm --- asset

When a company finds out that an NSF check was written to the company, the company must ______ the balance in the cash account.

decrease

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are

deposits outstanding.

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for

designing an internal control system.

Internal control consists of plans to (Select all that apply.)

safeguard company assets. provide accurate and reliable accounting information.

List the steps for a bank reconciliation in the correct order.

1. Adjust bank's cash balance 2. Adjust the company's cash balance 3. Update the company's cash account by recording items identified in the previous step

Which of the following are preventive controls?

Physical controls Separation of duties

The acronym NSF stands for

nonsufficient funds.

Which of the following steps are necessary to reconcile the bank balance and the cash account balance.

- Record items that reconcile the company's cash balance - Adjust bank's cash balance - Adjust the company's cash balance

Which of the following are errors in accounting for cash?

- Recording a cash collection of $4,000 but depositing $3,000 into the bank. - Recording a check for $168 for $186 in the cash account. - The bank processing a check for $210 as $120.

A bank reconciliation reconciles the bank statement with the company's

cash account in the balance sheet.

A bank statement may not agree with the amount of cash recorded by the company in the cash account because of ________ differences and errors.

timing

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 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. - The company made an error in recording a deposit.

Which of the following are common controls over cash receipts?

- having two different employees take custody of the checks and make the deposit - opening mail daily and making a detailed list of checks received

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

The framework for designing an internal control system is provided by the

Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Which of the following will cause differences between the bank statement balance and the accounting balance for cash?

Errors Timing differences

Which of the following items will require a journal entry following a bank reconciliation?

NSF checks Notes collected by the bank

Which of the following are detective controls?

Reconciliations Performance reviews Audits

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

Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier?

Smith

Sarbanes-Oxley Act

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

The ending balance in cash is reported in which financial statement(s)?

The balance sheet and statement of cash flows

What is the primary purpose of a bank reconciliation?

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation

Fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as ____________.

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and

errors.

True or false: Variability in operating cash flows is unimportant as long as the total cash flows over a three-year period is sufficiently positive.

false

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called occupational ____________.

fraudulence

Separation of duties and E-commerce controls are examples of ______ controls.

preventive

A bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals

the ending balance of cash in the accounting records.

If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference.

timing

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n) ___________ ___________ fund.

petty cash

A(n) _________ difference in cash occurs when a company records a transaction either before or after the bank records the same transaction.

timing or time