ACCT 2 Quiz 7

A journal entry is made each time a petty cash disbursement is made.

False

A person who has custody of an asset should maintain that asset's accounting records.

False

A properly designed and effective internal control system provides guarantees against losses and errors in accounting.

False

Deposits in transit are a common reconciling item in the computation of the adjusted book balance of cash on a bank reconciliation.

False

If the bank has recorded a deposit of $1,112 in error as a deposit of $1,121, the bank should be notified and a journal entry is required on the books of the depositor.

False

The reimbursement of a petty cash fund will require a credit to the Petty Cash account for the amount of the reimbursement.

False

When there is a difference between recorded cash sales and the count of cash in the cash register, the difference is recorded in an account called petty cash.

False

An analysis prepared to explain the difference between the balance of the checking account of the depositor and the checking account balance shown on the bank statement is called the bank reconciliation.

True

When preparing the bank reconciliation, it is discovered that a check written in the amount of $97.00 for payment of the company's telephone bill was recorded in error in the depositor's accounting records at $79.00. This error will require a journal entry to correct the balance of the Cash account.

True

The company's accountant recorded a bank deposit at $460, but the bank recorded the deposit at its correct amount of $640. (The accountant made the error.) How should this error be treated on the bank reconciliation? a)Addition to the book balance b)Deduction from the book balance c)Addition to the bank statement balance d)Deduction from the bank statement balance

a)Addition to the book balance

If two sales clerks share the same cash register, which principle of internal control has been compromised (or violated)? a)Establishing responsibility b)Separate record keeping from custody of assets c)Maintain adequate records d)All of the above e)None of the above

a)Establishing responsibility

Which of the following would be an appropriate use for petty cash? a)Postage b)Purchase of a computer c)Loan to an employee d)Advance on a payroll check e)All of the above

a)Postage

Which of the following is not a proper control procedure relating to cash? a)Custody of cash is separated from the record-keeping of cash. b)Cash receipts are deposited on a weekly basis in a bank. c)Two people are assigned the task of opening cash receipts in mail. d)All expenditures are made by check. e)A voucher system is used for approving and paying cash disbursements.

b)Cash receipts are deposited on a weekly basis in a bank

How should a deposit in transit be treated on a bank reconciliation? a)Addition to the book balance b)Deduction from the book balance c)Addition to the bank statement balance d)Deduction from the bank statement balance e)None of the above

c)Addition to the bank statement balance

What is the proper journal entry to adjust the cash account for a check returned as NSF by the bank? a)Debit Cash; Credit Accounts Receivable b)Debit Bad Debt Expense; Credit Cash c)Debit Accounts Receivable; Credit Cash d)Debit Accounts Payable; Credit Cash e)Debit Miscellaneous Expense; Credit Cash

c)Debit Accounts Receivable; Credit Cash

At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares the cash count with the recorded cash sales for the day, and (3) makes notations of differences (that is, cash overages or shortages) on a special report that is forwarded, along with the cash, to the accounting department. How should this procedure be described? a)It is an acceptable procedure, adhering to internal control principles. b)The procedure is designed to provide adequate internal control over cash. c)It is an unacceptable procedure, not following internal control principles. d)The procedure follows the broad principle of internal control of insuring assets. e)None of the above.

c)It is an unacceptable procedure, not following internal control principles.

Which of the following would be the benefit of having employees bonded? a)Bonding reduces the risk of loss. b)Bonding discourages theft. c)The bonding company is unlikely to be sympathetic with an employee involved in the theft d)All of the above. e)None of the above.

d)All of the above.

Which of the following items would not be shown as an adjustment to the book balance of cash on a bank reconciliation? a)A customer check that is returned as non-sufficient (NSF) by the bank b)A credit on the bank statement for interest earned c)A credit on the bank statement for collections by the bank of a note less the related service fee d)Outstanding checks e)Errors made by the depositor

d)Outstanding checks

Which of the following would require the Petty Cash account to be debited? a)The petty cash fund is short by $3.50. b)You Answered The petty cash fund is over by $4.50. c)The petty cash account is being decreased. d)The petty cash account is being created. e)None of the above.

d)The petty cash account is being created.

Which of the following is a purpose of an internal control system? a)Protect assets b)Ensure reliable accounting c)Promote efficient operations d)Urge adherence to company policies e) all of the above

e) all of the above