Account- Chapter 8 Cash and Internal Controls

Identify the principles of internal control by selecting the correct answers below. (Check all that apply.)

-Apply technological controls. -Establish responsibilities. -Separate recordkeeping from custody of assets. -Insure assets. -Perform regular and independent reviews. -Maintain adequate records.

Which of the statements below describe the goals and principles of cash management? (Check all that apply.)

-Encourage quick collection of receivables. -Money should be spent only when it is available. -Plan cash receipts to meet cash payments when due. -Keep a minimum level of cash necessary to operate.

Human (error/fraud)_____ is related to misjudgment or confusion. Human (error/fraud) ____involves intent to defeat internal controls for personal gain.

-Error -Fraud

Which of the following are principles of internal control? (Check all that apply.)

-Establish responsibilities. -Divide responsibility for related transactions. -Perform regular and independent reviews. -Maintain adequate records.

Which of the following are correct regarding why management uses internal controls? (Check all that apply.)

-uphold company policies. -ensure reliable accounting. -protect assets. -promote efficient operations.

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its ___ liabilities.

Current

Which statement below explains why liquid assets are needed in a business?

Liquid assets must be available to pay current liabilities.

Identify which of the items below are goals of good cash management. (Check all that apply.)

Plan cash receipts to meet cash payments when due. Keep a minimum level of cash necessary to operate.

True or false: The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled.

True

A good internal control to protect cash is to make cash payments using

checks

The triple threat of fraud involves:

pressure rationalization opportunity

What is the purpose of internal controls?

to protect assets and ensure reliable accounting

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy. (Check all that apply.)

-The extra $5 collected will be treated as a miscellaneous revenue. -The Cash account will be debited for $105. -The Sales account will be credited for $100. -The Cash Over and Short account will be credited for $5.

The following annual account balances are taken from ABC Co at year-end.

ABC Co. has shortened the amount of time it takes to collect receivables from customers. ABC Co. took approximately 31 days to collect cash from its credit customers in the current year. ABC Co. is shortening the amount of time that money is tied up in receivables.

Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)

Beginning-of-period balance in the account Deposits and other increases to the account during the period Withdrawals and other decreases to the account during the period End-of-period balance in the account

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n) (entry/charge/report) explaining any differences between the (checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the , (income/financial/bank) statement.

Blank 1: report Blank 2: checking Blank 3: bank

Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each to its definition on the right.

Outstanding check--A check written by the depositor that has not yet been received by the bank for payment A check written by the depositor that has not yet been received by the bank for payment Deposit in transit--Deposit made and recorded by the depositor, but not yet recorded on the bank statement Deposit made and recorded by the depositor, but not yet recorded on the bank statement NSF check--A check written by a customer who does not have enough money in his account to cover the check A check written by a customer who does not have enough money in his account to cover the check Bank charges--Service fees charged by the bank Service fees charged by the bank

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.

The adjusted bank balance must equal the adjusted cash balance per books.

Determine which of the statements below is correct regarding information reflected on a monthly bank statement.

The information on the bank statement reflects the bank's records of the depositor's account.

Auditors focus more on testing the ____ of a company's blockchain processes and technology than on verifying the ___ of its output.

effectiveness/accuracy

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for ____ (large/small) payments.

small

Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below. (Check all that apply.)

-Handling cash is separate from recordkeeping of cash. -Cash payments are made by check. -Cash receipts are promptly deposited in a bank.

Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)

-Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft. -Technology has reduced the number of processing errors. -Technologically advanced systems can record who made entries, the date and time of the entry, and the source of the entry.

All of the following describe blockchain:

-blockchain makes it more difficult for the ledger to be modified -blockchain is continuously and simultaneously updated and verified

Each of the following are types of technological impacts related to internal control:

-more extensive testing of records -separation of duties -new evidence of processing -reduced processing errors

Summarize the document flow, or steps, in a voucher system by placing the following actions in their correct order of occurrence.

1. A purchase requestion is filled out and place in voucher. 2. A purchase order is completed and a copy is place in voucher. 3. A receiving report is completed when the order arrives and placed in voucher. 4. The accounting department approves payment of the invoice and approval is placed in voucher. 5. The cashier issues a check for the amount of the invoice.

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the following entries is correct to record cash sales and the shortage.

Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

Match the banking term on the left with its definition on the right.

Deposit ticket--Choice, Lists currency, coins and checks deposited into an account Lists currency, coins and checks deposited into an account Check--Choice, A document signed by the depositor instructing the bank to pay a specified amount of money A document signed by the depositor instructing the bank to pay a specified amount of money Bank account--matches Choice, Used to deposit money for safekeeping and help control withdrawals. Used to deposit money for safekeeping and help control withdrawals. Remittance advice--Explains the reason for payment Electronic funds transfer--Electronic transfer of cash from one party to another

Review the following statements and select the ones which accurately describe a Petty Cash fund. Select all answers which apply.

It is established to pay for small payments like low-cost supplies and shipping fees, etc. It is an asset reported on the balance sheet.

Identify the statement below that describes what the Days' sales uncollected ratio assesses.

It measures how quickly a company can convert its accounts receivables into cash.

Which of the answers below correctly describe the Cash Over and Short account? (Check all that apply.)

It records the effects of cash overages and cash shortages. A debit balance reflects an expense. It is an income statement account.

Select the items below that would cause the bank statement balance to differ from the depositor's book balance.

NSF check, Deposit in transit, interest paid by bank

Describe the purpose of a purchase requisition by selecting the correct answer below. (Check all that apply.)

Purchase requisitions are used for control purposes. Managers are not allowed to place orders directly with vendors; instead, they fill out a purchase requisition. Purchase requisitions are used to inform the purchasing department of its needs.

Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)

Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two.

Determine which of the statements below accurately describe services provided by a bank. (Check all that apply.)

To withdraw money from an account, the depositor can use a check. A bank account is a record set up by a bank for a customer. Each bank deposit is supported by a deposit ticket.