Financial Accounting
1. Bank Service Charge 2. Deposit in transit 3. Interest earned 4. NSF check 5. Outstanding Check
1. Adjustments to the Book Balance 2. Adjustments to the Bank Balance 3. Adustments to the Book Balance 4. Adjustments to the Book Balance 5. Adjustments to the Bank Balance
Which of the following statements are true regarding operating cycles?
A company must complete its operating cycle efficiently to be successful. The activities in the operating cycle ultimately lead to cash. The operating cycle is a series of activities that a company undertakes to generate revenue. Merchandising and manufacturing companies have operating cycles, but service companies typically do not.
Which of the following are categories of employee fraud?
Asset Misappropriation, Corruption, and Financial Statement Fraud.
How can a company enhance its document procedures?
Assign sequential numbers to documents Require passcodes to open cash registers Restrict access to check-signing equipment
Which of the following describes segregation of duties?
Assigning responsibilities for record keeping to employees who do not have access to the assets for which they are accounting
What is the equation for cost of goods available for sale?
Beginning inventory plus purchases
What is included in the operating cycle of a merchandising company?
Buy Inventory Make Inventory Collect Cash Pay Operating Expenses
What is not one of the documents used in a voucher system?
Cash Count Sheet
What are included in the cash amount that is reported in the current assets section of a company's balance sheet?
Cash deposited with banks Cash equivalents Petty cash on hand
In a perpetual inventory system, which accounts are used by merchandisers to record sales of merchandise?
Cash or Accounts Receivable Cost of Goods Sold Inventory Sales Revenue
What are documented on a bank statement that is provided to a company?
Checks written by the company that have cleared the bank Deposits made by the business Interest earned on the account balance
What types of companies are required to comply with the requirements of the Sarbanes-Oxley Act (SOX)?
Companies that trade on the U.S. stock exchanges
Which controls activities would be performed to meet the independently verify principle of internal control?
Comparing the company's accounting information to information kept by an independent third party.
What is the term used to describe the attitude people in the organization hold regarding internal control?
Control Environment
In a perpetual inventory system, which accounts appear on the income statement of merchandisers?
Cost of Goods Sold Sales Revenue
What accounts are included in the month-end adjustment for expected additional returns?
Cost of Goods sold Inventory- Estimated Returns Refund Liability Sales Revenue
What is reported on the multi-step income statement?
Costs of goods sold Gross Profit Sales Revenue
A company deposits and stores its cash in a bank. Which internal control principles are evident in this procedure?
Documents Procedure Independently verifying the information Restricting Access
Which of the following are common principles of internal control?
Establish Responsibility, Restrict Access, and Segregate Duties
Cost of goods is an ________________ account reported on the _______________________.
Expense, Income Statement
Sales recorded when the goods leave the seller is known as the __________________________.
FOB shipping point
Which of the following explain why internal controls can never completely prevent and detect errors and frauds?
Human error and fraud
Which of the following are the factors that exist when fraud occurs?
Incentive, Opportunity, and Rationalization.
Which internal control principle is most evident in this procedure?
Independently verifying the information
What is not reported on the multi-step income statement?
Inventory
True statements regarding inventory
Inventory that was sold during the period remains on the balance sheet as a current asset. Costs included in the inventory account include the amounts paid to acquire the asset and prepare it for sale. Inventory is reported as a current asset on the balance sheet As inventory is sold, the cost of the inventory is expensed as cost of goods sold on the income statement.
The company will be required to repay its loan balance on demand if that requirement is not met. What term is used to describe this type of requirement in a lending agreement?
Loan Covenant
A weak system of internal controls provides the _________________ to commit fraud.
Opportunity
What are the two systems used to record inventory transactions?
Periodic and Perpetual
The ______________ inventory system allows managers to determine how much inventory needs to be purchased to replenish what has been sold.
Perpetual
The _____________ inventory system is superior to the _________________ inventory system because it provides the most up-to-date record of purchasing and selling inventory
Perpetual, Periodic
What is not an example of a company implementing controls to restrict access?
Placing security cameras in a server room.
Janet Cartwright feels that she is underpaid and is entitled to the inventory that she steals from the company's warehouse. What is the term used to describe this fraud triangle factor?
Rationalization
This document indicates the date, quantity, and condition of the goods. It is then sent to the accounting department to notify so the purchase can be recorded.
Receiving report
How does the customer typically explain the purpose of a payment that is sent in the mail to one of its suppliers?
Remittance Advice
What are the reasons that a company's records can differ from the bank's records?
The bank has recorded items the company doesn't know about until the bank statement is examined. The company has recorded items the bank doesn't know about at the time it prepares the statement of account
Why is internal control over cash important?
The elevated risk of theft The high volume of cash transactions
What term is used to describe the process for approving and documenting all purchases and payments on account?
Voucher System
