AC 210 Chapter 5

Which of these are cash equivalents?

-Investments within 3 months of maturity -Money market funds

Which of the following are true regarding a bank statement.

-It lists all checks that have cleared the bank -It may include NSF checks -It includes interest earned -It may include service charges

NSF checks are the same as _________.

-bounced checks -non sufficient funds checks

Employee fraud is often grouped into 3 categories:

-corruption -assest misappropriation -financial statement fraud

Incentives for committing fraud in order to satisfy personal greed include

-getting a bigger paycheck -increasing personal wealth

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

-perform bank reconciliations -record cash collected in journal

Which of the following is subtracted from the bank balance on a bank reconciliation?

Outstanding checks

When a check is presented to a bank for payment & the amount is deducted from the payer's account the check is said to have ________ the bank.

cleared

Place the order of the steps in documenting and controlling purchases in a voucher system with the first step listed at the top and the last at the bottom.

1. Request goods or services by submitting a purchase requisition 2. Prepare a purchase order after suppliers and prices have been approved 3. Prepare a receiving report 4. Prepare a supplier invoice and prepare the journal entry

A cash register does not _________.

reconcile accrual accounting with cash accounting

restricted cash is reported ___________.

separately as an asset on the balance sheet

In preparing your bank reconciliation, you notice that you recorded a deposit as $100 instead of $10. You should _____________.

subtract $90 from your cash and make an entry

____________ is one of the three fraud triangle components where the fraudsters perceive the misdeed is unavoidable or justified.

Rationalization

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

receiving report

This document is compared to the internally generated documents of the voucher system to ensure the quantity and costs agree with what has been ordered and received. If all reconciles, the accounting department will record the purchase in the accounting records.

receiving report

Electronic funds transfer (EFT) discovered on the bank statement ____________.

will need to be adjusted on your records because your cash balance is affected

A company has $10,000 cash balance per its books. The bank statement has a balance of $9,580. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, a $100 NSF check from a customer, and a $20 bank service charge. Given the following reconciling items, the up-to-date cash balance equals __________.

$9,880

If a cashier rang up sales totaling $5,096, but had $5,100 to deposit, which journal entry would be recorded?

A debit to cash for $5,100; a credit to Cash Overage of $4; and a credit to Sales Revenue of $5,096

If the cash collected is less than the amount per the cash register, then ___________.

Cash shortage is debited

The three components of the __________ ____________ are incentive, opportunity and rationalization.

Fraud Triangle

Match the principle of internal control responsibility described.

Independent verification- The supervisor reconciles the cashier's count sheet to the cash collected Restrict access- The supervisor is responsible for keeping the cash safe and getting the cash to the bank Document procedures- The supervisor prepares a deposit slip Segregation of duties- The supervisor forwards the verified deposit slip to the accounting record to record the cash receipts

Which of the following would be added to your cash balance based on the information on your bank statement?

Interest deposited

Instead of a petty cash system, many companies use ___________ which allow employees to purchase business-related items.

Pcards (purchasing cards)

Which is used to avoid the time and cost of writing checks for business expenses that are small in amount and is controlled by limiting the amount in it and subjecting it to surprise audits?

Petty Cash

___________ cash must be reported separately on the balance sheet because it is legally or contractually required to be set aside for a specific purpose.

Restricted

Cashiers at a supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

Segregate duties

In a strong system of internal control, which employee should be the one to verify cash count sheets and prepare deposit slips and take the cash to the bank?

Supervisor

Good internal control for cash receipts would include having the __________ compare the record of cash sales per the register with the count sheets and bank deposit slip returned by the bank.

accounting department

Deposits in transit are ________ on a bank reconciliation.

added to the bank balance

In a bank reconciliation, interest revenue on the bank account balance is added to the __________ balance.

book

The company needs to record the reconciling items that are on the ________ side of the bank reconciliation.

book

The bank will show a customer's withdrawal as a _____________.

debit, because a withdrawal decreases its liability from the bank's point of view

In a bank reconciliation, an outstanding check is __________.

deducted from the bank balance

Your customer's NSF check found on the bank statement is a reconciling item on a bank reconciliation and will need to be ___________.

deducted from the cash balance in your accounting records

A bank service charge should be a _________ on a bank reconciliation.

deduction from the book balance

Each cash drawer is assigned to only one employee in a supermarket. This is an example of the internal control principle of ____________.

establishing responsibility

Outstanding checks are checks that ___________.

have been written but have not yet cleared the bank.

An _________ system controls the amount paid to others by limiting the total amount of money available for making payments.

imprests

The procedure of bank reconciliation is an example of which principle of internal control?

independent verification

An incentive to commit fraud may be caused by managers who receives bonus payments based on the strength of the company's reported ____________.

net income

If the bank makes an error by depositing your check into another depositor's account, then you should __________ and contact the bank.

not change your records

A difference between an imprest payroll account and petty cash is petty cash is ___________.

not held at the bank

To avoid duplicate payment, the voucher should be marked "______" as the final step in the voucher system.

paid

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

purchase requisition

Increasingly, the basic steps of the voucher system are performed using ____________ process automation, which combines automation and artificial intelligence.

robotic

Which of the following is an example of weak internal controls?

the mail-room clerk records daily cash receipts in the journal

Mandatory ____________ is a policy that is established to make it difficult for fraudsters to cover up their theft while they are away.

vacation

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

-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 -External auditors must test the effectiveness of the company's internal controls

Match the following control components of the framework used when analyzing internal control systems with the appropriate description.

-control environment: refers to the attitude of the people in the organization and their commitment to integrity -risk assessment: evaluate the potential for fraud -control activities: work responsibilities and duties completed to reduce risks to an acceptable level -monitoring activities: evaluating the internal control system to see if working as intended

The Sarbanes-Oxley (SOX) Act aims to reduce fraud by _________.

-counteract incentives -encouraging honesty in employees -reducing opportunities

A loan _____________ specifies terms of a loan agreement that, if broken, can allow the leader to renegotiate the terms of the loan to force repayment.

covenant

Which of the following is not an internal control for checks received through the mail?

The accounting department counts the cash, prepares the deposit slip and deposits the cash in the bank

Service charges are __________ of a bank reconciliation.

subtracted from the book's balance

NSF checks from customers should be a _____ on a bank reconciliation

subtraction from the book balance

A _________ is a collection of documents prepared in the process of approving, processing and documenting all purchases and payment made on account.

voucher

The bank will shows a customer's deposit on bank statements as a _____________.

credit, because a deposit is a liability from the bank's point of view

A __________ deposit is initiated by an EFT instructing a bank to transfer pay due employees into the employees' bank accounts.

direct

Why might a bank statement and the company's records differ?

- Customer checks that bounced (NSF) - Deposits were made at the end of the bank statement date in an ATM - Not all checks written cleared the bank

The SOX Act provides increased regulations for __________.

- corporate executives - internal controls - auditors

How do banks help businesses control cash?

-documenting procedures -restricting access to cash -independently verifying

The quality of financial reporting for publicity traded companies is improved through _____________.

-evaluating and reporting on the effectiveness of internal controls -obtaining an external audit

Good internal control for cash receipts to be performed by the accounting department should include ___________.

-recording the cash receipts in the journal -comparing cash register sales with the cash count sheets and bank deposit slip

Good internal control for checks received through the mail would include the mail clerk __________.

-sending the cash receipts list and the customers' remittance advices to the accounting department -giving checks and money orders to the supervisor who makes the bank deposit

Which of the following provisions of the SOX Act aim to encourage honesty and the reporting of dishonest acts?

-whistle-blower protection -code of ethics -anonymous tip lines

T/F: Strong internal control surrounding cash receipts requires the cashier to perform the following procedures: count the cash receipts, take the cash to the bank, and record the amount collected in the accounting records

False

This month's bank statement shows that the bank incorrectly credited ABC Corp.'s account for a $600 deposit that should have been credited to XYZ Corp.'s account. How would this item be treated on ABC's bank reconciliation?

It would be deducted from the bank balance