Ch 5 Learnsmarts

If the company's accountant mistakenly recorded a $58 deposit as $85, the error would be shown on the bank reconciliation as a(n) ______.

$27 deduction from the book balance

Internal control for cash is important because ______.

- cash is portable and is "owned" by whomever possesses it - of the high risk of theft - of the large volume of cash transactions - the risk of cash-handling errors is significant

While preparing the bank reconciliation for March, the accountant for ABC Company discovered that a $694 check in payment of an account payable had been entered incorrectly in the journal as $649. Which of the following is true?

An adjusting entry must be made to debit Accounts payable and credit Cash for $45.

In a bank reconciliation, interest revenue earned on the bank account balance is ______

added to the book balance

If a bank reconciliation included a deposit in transit of $670, the company's journal entry for this reconciling item would include ______.

nothing, because the deposit has already been recorded

Deposits in transit have already been ______.

added to your cash balance per your books and not to the bank balance

Which of the following is shown as an addition to the bank balance on a bank reconciliation?

deposits in transit

A(n) ______ system involves the processing of purchases and payments made on account.

voucher

What are reasons internal controls can never completely prevent and detect errors and fraud?

- Costs exceed benefits - Human error - Collusion

Which of the following reconciling items on a bank reconciliation need to be recorded in the company's record to adjust its cash balance so that it up to date?

- Customer's check rejected by the bank as NSF - EFT received from customers discovered on the bank statement - Interest Revenue

Which of the following are typical reconciling items on the book side of a reconciliation because the company did not know about these items until it got the bank statement?

- Electronic funds transfers - Services charges - Interest income

Bank reconciliations are needed to reconcile for ______.

- deposits in transit - outstanding checks

Which of the following duties should not be the responsibility of an employee who has access to cash?

- perform bank reconciliations - record cash collected in the journal

A goal of the Sarbanes-Oxley Act is improving corporations' internal controls. Which of these may accomplish this goal?

-External auditors must test the effectiveness of the company's internal controls. -Marketing managers must determine whether the marketing team is submitting accurate sales and expense reports. -An audit committee of independent directors oversees financial matters of the company.

Which of the following is not a significant objective of the Sarbanes-Oxley (SOX) Act?

Increase rationalization

The Sarbanes-Oxley (SOX) Act provides increased regulations for ______.

auditors internal controls corporate executives

deposits in transit are added to the ____ side of the bank reconciliation

bank

NSF checks from customers should be subtracted from the _____ balance on a bank reconciliation

book

an outstanding check in a bank reconciliation is

deducted from the bank balance

Outstanding checks have already been ______.

deducted from your cash balance per your books but not the bank balance

Outstanding checks are checks that ______.

have been written but have not yet cleared the bank

The purchasing system begins with an authorized employee completing a manual or electronic purchase ____ form which is then reviewed and approved by a supervisor before an order is placed with a supplier.

requisition

After approval of a purchase has been obtained, the purchasing agent completes a prenumbered _____ that identifies the supplier, the delivery location, and the approved quantity and cost.

purchase order

The document that indicates the date, quantity, and condition of the goods is called a ____ report. It is then sent to the accounting department to notify that the purchase can be recorded. (Enter one word per blank.)

receiving

This document indicates the date, quantity, and condition of the goods. It is then sent to the accounting department to notify the purchase can be recorded.

receiving report

A bank statement ____ is an internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash. (Enter one word per blank.)

reconciliation