Ch. 4 Financial Accounting

internal controls

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as

errors

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and

reconciliation

Preparation of a bank ______ q4helps maintain control of cash accounts.

preventative

Separation of duties and E-commerce controls are examples of ______ controls.

nonsufficient funds.

The acronym NSF stands for

timing

A bank statement may not agree with the amount of cash recorded by the company in the cash account because of ______ differences and errors.

cannot be paid because the account does not contain enough funds.

A check that is NSF (nonsufficient funds) is a check that

detective

The two types of control procedures are preventive and ______.

fraud

The use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources is called occupational

False

Variability in operating cash flows is unimportant as long as the total cash flows over a three-year period is sufficiently positive.

1. having two or more

Which of the following are common controls over cash receipts?

1. audits 2. reconciliations 3. performance reviews

Which of the following are detective controls?

1. timing differences 2. errors

Which of the following will cause differences between the bank statement balance and the accounting balance for cash?

1. balance sheet 2. statement of cash flows

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's:

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation.

What is the primary purpose of a bank reconciliation?

fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as

detective

A periodic performance review is an example of a(n) control.

checks outstanding

Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called

checks outstanding.

Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called

deposits outstanding

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are

Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

In a bank reconciliation, which of the following will require a journal entry by the company?

1. Adjust bank's cash balance 2. Adjust the company's cash balance 3. Update the company's Cash account by recording items identified in the previous step

List the steps for a bank reconciliation in the correct order.

reconciliation

One of the most important internal controls for cash is the bank ______.

cash

The asset that is most susceptible to employee fraud is

The balance sheet and statement of cash flows

The ending balance in cash is reported in which financial statement(s)?

Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

The framework for designing an internal control system is provided by the

preventive and detective controls.

Two types of control activities are

1. physical controls 2. separation of duties

Which of the following are preventive controls?

small amounts of cash needed for low-cost items.

A petty cash fund is used for

timing

A(n) _______ difference in cash occurs when a company records a transaction either before or after the bank records the same transaction

1. Depositing checks into the bank and recording receipts in the accounting records 2. Opening the mail and deposit of checks in the bank

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

timing

If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference.

Smith, because its operating cash flows show more variability

Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier?

designing an internal control system.

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for

cash

The asset that is most easily stolen and susceptible to fraud is ______.

1. Charges for NSF checks. 2. Service charges.

W ......kzZZhen adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?

1. The company made an error in recording a deposit. 2. Deposits outstanding that have been recorded on the company's records, but not on the bank's. 3. The bank paid interest that the company has not recorded. 4. The bank made an error in recording a deposit made by the company.

What would cause a bank statement not to agree with the cash balance in the accounting records?

1. checks from customers 2. balance in checking accounts 3. currency and coins

Which of the following items are included in cash?

Accounts receivable from customers

Which of the following items are not included in cash?

1. Notes collected by the bank 2. NSF checks

Which of the following items will require a journal entry following a bank reconciliation?

1. Adjust the company's cash balance 2. Adjust bank's cash balance 3. Record items that reconcile the company's cash balance

Which of the following steps are necessary to reconcile the bank balance and the cash account balance.

Collections of funds by the bank.

When adjusting the company's cash account balance in a bank reconciliation, which item must be added to the cash account balance?

1. safeguard company assets 2. provide accurate and reliable accounting information

Internal control consists of plans to (Select all that apply.)

1. service charges 2. charges for NSF checks

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?