ACCT Ch. 5 learnsmart

Why might a bank statement and the company records differ?

- customer checks that bounced (NSF) - not all checks written cleared the bank - deposits were made at the end of the bank statement date in an ATM

in a bank reconciliation, the the EFT received by the bank from a customer's note receivable owed to the company is...

added to the book balance

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 incorrectly entered 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

a ________ ________ is initiated by an EFT instructing a bank to transfer pay to employee's bank accounts

direct deposit

a principle of internal control - provide documents to show activities that have occurred

document procedures

EFT stands for _______ ________ _________

electronic fund transfer

____________ __ ______ is essential for safeguarding assets

segregation of duties

deposits in _________ are added to the b_____k side of the bank reconciliation

transit / bank

a process for approving and documenting all purchases made on account

voucher system

which of the following items on a bank reconciliation need to be recorded so that a company's records are up to date?

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

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

- record cash collected in the journal - perform bank reconciliations

(T/F) The person who has custody of an asset should also account for the asset. The person who performs both duties will best know what the balance should be for the accounting records.

FALSE

(T/F) Outstanding checks have been written but have not yet been cleared by the bank.

True

the three categories of employee fraud are _______, ________ and ________.

asset misappropriation, financial statement fraud and corruption

an internal report prepared to compare the company's cash record with the bank statement

bank reconciliation

an insurance policy that partially reimburses a company for losses caused by employee fraud

bonding

NSF checks from customers should be subtracted from the company's ______ balance on a bank reconciliation

book

in a bank reconciliation, interest revenue on the bank account balance is added to the b____ balance.

book

in a bank reconciliation, an outstanding check is...

deducted from the bank balance

a principle of internal control - assign each task to only one employee to determine who is at fault for error or theft

establish responsibilities

Among the new requirements of SOX, those who willfully misrepresent financial results...

face stiff fines and possible jail sentence

the three components of the fraud triangle that exists when fraud occurs

incentive, opportunity, rationalization

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

increase rationalization

a principle of internal control - check others' work

independently verify

A system of ________ _________ consists of actions taken to promote efficient and effective operations, protect assets, enhance accounting information and adhere to laws and regulations.

internal control

NSF stands for...

non-sufficient funds

a principle of internal control - do not provide access to assets or info unless it is needed for a task

restrict access

a principle of internal control - do not make one employee responsible for all parts of a process

segregate duties