CH.4 pre assignment

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

timing

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

timing

A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to

timing differences and errors.

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

timing

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

-Depositing checks into the bank and recording receipts in the accounting records -Opening the mail and deposit of checks in the bank

List the steps for a bank reconciliation in the correct order. (Drag the items to put them in the proper order with the first step on top.)

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

Which of the following items are not included in cash?

Accounts receivable from customers

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

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

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

Balance sheet Statement of cash flows

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

Charges for NSF checks Service charges

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

Collections of funds by the bank

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

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

Which of the following items are included in cash?

Currency and coins Checks from customers Balance in checking accounts

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

Errors Timing differences

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

False

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

Notes collected by the bank NSF checks

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n) ____ ____ fund

Petty Cash

Which of the following are preventive controls?

Physical controls Separation of duties

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

Record items that reconcile the company's cash balance Adjust bank's cash balance Adjust the company's cash balance

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?

Smith

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

The balance sheet and statement of cash flows

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

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

What is the primary purpose of a bank reconciliation?

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

A non-sufficient funds check requiring an adjustment to the cash balance was written:

To the company preparing the bank reconciliation

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

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

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

cash

The asset that is most susceptible to employee fraud is _______.

cash

A bank reconciliation reconciles the bank statement with the company's ____

cash account in the balance sheet

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

deposits outstanding

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

designing an internal control system.

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

errors

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

fraud

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

internal controls.

The acronym NSF stands for

nonsufficient funds

Which of the following are common controls over cash receipts?

opening mail daily and making a detailed list of checks received having two different employees take custody of the checks and make the deposit

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

preventive

Two types of control activities are

preventive and detective controls.

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

provide accurate and reliable accounting information. safeguard company assets.

Internal control consists of plans to __________.

provide accurate and reliable accounting information. safeguard company assets.

One of the most important internal controls for cash is the bank _____

reconciliation

Preparation of a bank _________ helps maintain control of cash accounts.

reconciliation

A petty cash fund is used for

small amounts of cash needed for low-cost items.