ACC EXAM 2

In a bank reconciliation, an outstanding check is ______.

Deducted from the bank balance

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest pretax income?

LIFO

Total revenues less discounts, returns, and allowances are referred to as

Net revenues

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

Sarbanes-Oxley Act.

Which of the following are preventive controls?

Separation of duties Physical controls

Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees

Seperations of duties

A petty cash fund is used for

Small amounts of cash needed for low-cost items.

In a perpetual inventory system, when a company sells inventory on account, how many entries are required?

Two

FOB shipping point means title to the goods passes

When they are shipped

FOB destination means title to the goods passes

When they arrive at the destination

_____ inventory refers to the products that have been started in production, but are still incomplete

Work-in progress

A trade discount is

A percentage reduction from list price

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

Account receivable

A(n) ___________ ___________ is the legal right to receive cash from a credit sale and represents an asset of the company.

Account recievable

Munchkin Inc. pays for promotional expenses by charging the company's credit card. Munchkin should debit an expense and credit

Accounts payable

A company pays for a purchase with a credit card. What is the effect of this purchase on the accounts?

Accounts payable will increase

The allowance for uncollectible accounts is a contra account to

Accounts receivable

Which of the following items are not included in cash?

Accounts receivable from customers

In a bank reconciliation, a deposit outstanding is

Added to the bank balance.

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

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

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

The approach that considers the age of various accounts receivables to estimate uncollectible accounts is referred to as the ____________ method of accounts receivable

Aging

Internal control procedures for cash disbursements (other than small disbursements from petty cash) should include that

All disbursements are made by check, debit card, or credit card. Checks are signed by authorized individuals. All expenditures are authorized.

Which of the following items are readily available from an inventory account under the perpetual inventory system?

Beginning inventory balance Ending inventory balance Individual purchases Cost of units sold

A trade discount is recognized

By reducing the revenue amount recorded.

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

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

A journal entry that affects a company's Statement of Cash Flows will include an inflow or outflow of _______

Cash

Joyce Corp. uses the percentage-of-receivables method to account for bad debt expense. Joyce determines that a customer account of $20,000 should be written off as uncollectible. The write off of the account will include which of the following entries?

Credit to Accounts Receivable Debit to Allowance for Uncollectible Accounts

Planters Corp. wrote off a customer's uncollectible account in April. In the following month, Planters collected from the customer in full. The entry to reinstate the account would require a

Credit to Allowance for Uncollectible Accounts.

A trade discount is a reduction from the list price, which is used to:

Disguise real prices from competitors Change prices without publishing a new catalog Give quantity discounts to customers

The receivables turnover ratio and the average collection period provide information about a company's

Effectiveness in managing receivables

Gwendolyn uses the allowance method to account for uncollectible receivables. Gwendolyn should record _____ bad debt expense ______.

Estimated; at the end of the year

Choice, Most closely approximates the actual physical flow of inventory Most closely approximates the actual physical flow of inventory

FIFO

For internal record keeping, most companies carry their inventory using the _____ basis.

FIFO

Generally, if a company wants its inventory cost flows to be the same as the inventory's physical flows, what inventory method would it use?

FIFO

The __________ inventory cost flow assumption typically approximates the actual physical flow of inventory items of most companies.

FIFO

Which inventory cost flow method approximates the physical flow of inventory items?

FIFO

Net sales revenue minus cost of goods sold is

Gross profit

When the allowance method is used, the write-off of an uncollectible account:

Has no effect on net income

Pixie Inc. writes off a specific accounts receivable. If Pixie is using the allowance method, the write off will _____ net income.

Have no effect

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be __________ than cost of goods sold determined using the FIFO inventory assumption.

Higher; greater

Where is a note receivable reported in the balance sheet?

In either current or noncurrent assets, as appropriate

Freight-in is

Included as a cost of inventory

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs

Incurred several years earlier.

A calendar-year-end company that accepts a 3-month interest-bearing note on December 1 must accrue __________ revenue on December 31

Interest

(Face value x annual interest rate x fraction of the annual period) is the formula for

Interest on a note

The disclosure that shows the difference in the cost of inventory between LIFO and FIFO is referred to as the

LIFO reserve

An aging schedule classifies accounts receivable based on

Length of time outstanding

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide

Lower of cost and net realizable value; greater

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be __________ than ending inventory determined using the FIFO inventory assumption.

Lower; smaller

When a company has earned interest in the current period but has not yet recorded the interest, what type of adjustment is the company required to make?

Make an adjusting entry at the end of the current period to accrue the interest earned

Who has final responsibility for internal controls?

Management

Companies that produce the inventory they sell are referred to as

Manufacturers

Receivables not expected to be collected should

Not be counted in assets of the company

A formal credit arrangement between a creditor and debtor is called a(n)

Note receivable

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender.

Note receivable

The statement of cash flows classifies items as

Operating, investing, and financing.

Strong internal control systems allow greater reliance by investors on:

Reported financial statements

The difference between LIFO and FIFO disclosed in the notes to the financial statements of a company currently utilizing the LIFO cost flow assumption is sometimes referred to as the LIFO __________

Reserve

Identifies and analyzes factors that could prevent objectives from being achieved

Risk assessment

Internal control consists of plans to

Safeguard company assets. Provide accurate and reliable accounting information.

When a customer returns a product for a refund, in which account is the entry recorded?

Sales return

The inventory turnover ratio directly measures ______.

The times per period the average inventory balance is sold

Which of the following represent reasons why managers closely monitor inventory levels?

To minimize costs of inventory write-downs due to obsolete inventory To ensure that sufficient units are available

The LIFO adjustment is used internally to convert the inventory

To the LIFO basis

The allowance method estimates

Uncollectible accounts

A partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales

Allowance

A sales return occurs when a customer returns a product for a full refund, whereas a sales _________________ is when the customer keeps the product and obtains a partial refund.

Allowance

To record an estimate for future bad debts at the end of the period, an adjustment would be made with a credit to

Allowance for uncollectible accounts

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the

Allowance method

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer?

An entry to reinstate the account receivable and an entry to record payment

With the allowance method, bad debt expense is recorded

At the end of the period when bad debts are estimated

Two important ratios that help in understanding a company's effectiveness in managing receivables are the:

Average collection period Receivable turnover ratio

The lower of cost and net realizable value method was developed to

Avoid reporting inventory at an amount that exceeds the benefits it provides

The cost of estimated accounts receivable that will not be collected is referred to as

Bad debt expense

Where is inventory reported in the financial statements?

Balance sheet as a current asset

Compared to other methods of estimating uncollectible accounts, the aging of accounts receivables method tends to

Be more accurate

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

Cash

Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _______ and credit _______.

Cash; Accounts Receivable

The Sales Returns and Sales Allowances accounts are __________ __________ accounts and require a debit entry to increase the account

Contra revenue accounts

Allowance for Uncollectible Accounts has a credit balance because it is a(n) _____ account.

Contra-asset

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Cost of Goods Sold Inventory

The formula for inventory turnover is

Cost of goods sold divided by average inventory

A periodic inventory system measures cost of goods sold by

Counting inventory at the end of the period

The account "Allowance for Uncollectible Accounts" normally has a ___________ balance

Credit

Sales to customers in which the customers pay within 30 to 60 days are referred to as

Credit sales Sales on account

Adrian Corp. sells goods on account for $100,000 on May 1. The customer paid for the goods on May 10. On May 15, the customer returns $40,000 of the merchandise. The entry Adrian makes on May 15 will include the following:

Credit to Cash Debit to Sales Returns

Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. The customer has not yet paid for any of the goods. What is the entry Warner will make on April 20 when the goods are returned?

Debit Sales Returns; credit Accounts Receivable.

The journal entry to record bad debt expense includes

Debit to bad debt expense Credit to allowance for uncollectible accounts

Notes receivable normally has a __________ balance because it is classified a a __________

Debit; asset

Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to:

Decrease an asset and increase an expense Increase an asset and increase revenue

Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):

Decrease in Accounts Receivable

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.

Decreases; retained

The Accounts Receivable account is reduced when the seller:

Determines that a specific customer account will not be collectible

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Which inventory costing method assumes that the inventory's costs flow out in the same order the goods are received?

FIFO

The formula for calculating interest on a note is

Face value x annual rate x fraction of the annual period

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

False

___________ __________ inventory consists of items for which the manufacturing process is complete

Finished goods

Which inventory account consists of the cost of items for which the manufacturing process is complete?

Finished goods inventory

Items held for sale in the normal course of business are referred to as

Inventories or inventory

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

Inventory

Cost of goods sold divided by average inventory is

Inventory turnover

The ___________ __________ ratio shows the number of times the firm sells its average inventory balance during a reporting period.

Inventory turnover

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for

Inventory. Cost of goods sold.

Assuming that prices rise over time, which inventory cost flow assumption will result in the lowest ending inventory?

LIFO

What type of company purchases raw materials and makes goods to sell?

Manufacturers

The definition of inventory includes which of the following items?

Materials used currently in the production of goods to be sold Items currently in production for future sale Items held for resale

Companies that serve as intermediaries between manufacturers and end users typically are referred to as ____ companies.

Merchandising

__________ companies purchase inventory that is primarily in finished form and ready for resale to customers.

Merchandising

_____________ companies purchase inventory that is primarily in finished form and ready for resale to customers.

Merchandising

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement.

Multiple-step

Which of the following methods are not used for inventory costing?

NIFO Simple-average

Gross Profit is

Net Sales Revenue minus Cost of Goods Sold

What is the formula for the receivables turnover ratio?

Net credit sales divided by average accounts receivable (net).

The financial statement effects of recording an allowance for estimated sales returns are that:

Net income decreases Assets decrease Equity decreases

Revenues and expenses arising from activities that are not part of the company's operations are classified as ______ revenues and expenses.

Non operating

Managers typically monitor inventory very closely to ensure that sufficient units are available for sale and to prevent inventory from becoming

Outdated; spoiled

When adjusting the bank balance in a bank reconciliation, which item must be subtracted from the bank balance?

Outstanding checks

Kilian Company's inventory balance at the end of the current year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered, the effect of this error on financial statements in the following year will be:

Overstated net income

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are Multiple choice question.

Paid by the supplier

Freight-in on inventory purchases is typically recognized as

Part of the cost of purchasing inventory

Shelly Company must first take a physical inventory to determine the cost of inventory still on hand

Periodic inventory system

Sherman Company recognizes cost of goods sold after completing a physical inventory.

Periodic inventory system

Under the __________ inventory system, the inventory account reflects purchases during the year, as well as cost of units sold.

Perpetual

Choice, Peter Company recognizes cost of goods sold each time it recognizes a sale. Peter Company recognizes cost of goods sold each time it recognizes a sale.

Perpetual inventory system

Neumann Company can determine the cost of inventory still on hand by referring to the inventory account

Perpetual inventory system

Which inventory system recognizes cost of goods sold and decreases inventory each time a sale occurs?

Perpetual inventory system

The company should maintain security over assets and accounting records

Physical controls

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

Preventive

The _____ ratio shows the number of times during a year that the average receivable balance is collected.

Receivables turnover

Two entries are required when a previously written off account is collected. These two entries include:

Reinstate the account receivable Record the collection on the account receivable

A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n)

Sales discount

Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?

Sales discount

A customer returns merchandise purchased during the month and receives a refund of the full sales price.

Sales return

When merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a(n)

Sales return

Net revenues is calculated as total revenues minus which of the following items?

Sales returns Sales allowances Sales discounts

The inventory costing method that matches each unit of inventory with its actual cost is referred to as the _____ method

Specific identification

What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements? (Assume that the sales price is higher than the cost of inventory)

Stockholders' equity increases Total assets increase Net income increases

Which of the following allows greater reliance by investors on reported financial statements?

Strong internal control systems

For accounts receivable, the longer an account is outstanding,

The more likely it will prove uncollectible

The receivables turnover ratio indicates

The number of times during a year that the average accounts receivables were collected

The direct write-off method is used when

Uncollectible accounts are not anticipated or are immaterial

Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be:

Understated assets, retained earnings, and net income

Which of the following accounts would be found in the balance sheet of a manufacturing company?

Work in process

Which of the following accounts are typically reported in the balance sheet of a manufacturing company?

Work in process Raw materials Finished goods

___________ inventory refers to the products that have been started in production, but are still incomplete.

Work-in process

The specific identification method

Would be beneficial to a company that makes fine jewelry Matches each unit of inventory with its actual cost

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

Included in Gerald's inventory

A multiple-step income statement reports multiple levels of

Income

Bad debt expense is reported on the __________ __________ and is classified as an operating expense

Income statement

Bad debt expense is reported on the:

Income statement

The direct write-off method is required for

Income tax purposes

Purchasing inventory on account:

Increases liabilities Increases assets

The list price in Boyton's catalog indicates that Product A sells for $3,000, with a trade discount of 5%. Boyton sells the goods to a customer who qualifies for the trade discount. At what amount should Boyton record the sale and related account receivable?

$2,850

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

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

Prime Corp. has an ending balance in the accounts receivable account of $100,000. Prime recorded bad debt expense of $3,000. Prime has an ending balance in the allowance for uncollectible accounts of $7,000. What is the net accounts receivable balance?

100,000 - 7,000 = 93,000

Tudor Corp. has an ending balance in the accounts receivable account of $20,000. Tudor recorded bad debt expense of $1,000. Tudor has an ending balance in the allowance for uncollectible accounts of $2,000. What is the net accounts receivable balance?

20,000 - 2,000 = 18,000

The estimated expense for accounts that may not be collected is referred to as

A bad debt expense

The percentage-of-receivables approach to measuring bad debt expense is referred to as _____ method.

A balance sheet

The account "Allowance for Uncollectible Accounts" is classified as

A contra asset to accounts receivable

The normal balance of notes receivable is:

A debit

Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?

As a non current asset

Accounts receivable should be classified as a(n)

Asset

York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows:

Assets decrease Equity decreases

Using the perpetual inventory system, what is the effect of a sale of inventory on assets?

Assets decrease by the cost of the inventory Assets increase by the sales price of the inventory

Meller purchases inventory on account. As a results, Meller's

Assets will increase

Inventory is classified as

Current asset

When an account previously written off is collected in full, the entry to reverse the previous write-off would require which of the following?

Debit Accounts Receivable Credit Allowance for Uncollectible Accounts

Clark uses the perpetual inventory system. Clark sells goods to a customer on account for $1,000. The cost of the goods sold was $700. Which of the following entries are required?

Debit Accounts Receivable $1,000; credit Sales Revenue $1,000 Debit Cost of Goods Sold $700; credit Inventory $700

Shannon Corp. uses the aging method to account for bad debt expense. Shannon determines that a customer account of $10,000 should be written off as uncollectible. The write off of the account will include

Debit Allowance for Uncollectible Accounts

Josh Corporation uses the perpetual inventory system. Josh sells goods to a customer on account for $2,000. The cost of goods sold is $1,500. What is the entry required to record the expense of the inventory sold?

Debit Cost of Goods Sold $1,500; credit Inventory $1,500

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

Debit inventory

The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties

Employee management

The amount of cash in the balance sheet reflects the

Ending cash on the balance sheet date.

The shipping term FOB stands for

Free on board

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

Fruad

Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year.

Future; current

The allowance method is required by

GAAP

Provides better matching of current revenues with current inventory cost

LIFO

The __________ cost flow assumption more realistically matches the current cost of inventory with current sales revenue.

LIFO

When prices increase, the __________ inventory method provides the best matching of revenue and expenses.

LIFO

When prices increase, the __________ inventory method tends to decrease a company's tax liability during a particular fiscal period.

LIFO

When prices rise, which inventory method tends to result in lower income and a lower tax liability?

LIFO

Which inventory cost flow method most realistically matches the current cost of inventory with the current revenue it produces?

LIFO

Which of the following methods are available for costing inventory?

LIFO Specific identification Weighted-average FIFO

Vogel Company maintains its inventory records using the FIFO assumption, but reports its inventory consistent with LIFO. At the end of the year, Vogel converts its inventory balance from FIFO to LIFO by using the

LIFO adjustment

On a multiple step income statement, the category of revenues and expenses reported immediately after operating income is referred to as _____________ revenues and expenses

Non operating

The acronym NSF stands for

Nonsufficient funds.

_____________ _____________ inventory includes the cost of components that will become part of the finished product but have not yet been used in production

Raw materials

The Work-in-Process inventory account typically includes which costs?

Raw materials Direct labor Indirect manufacturing costs

Which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw materials inventory

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

Reconciliation

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

The balance sheet and statement of cash flows

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

detective

The percentage-of-receivables method of estimating bad debt applies ____ to _____.

A single percentage; accounts receivable

A percentage reduction from list price.

A trade discount

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for:

Inventory

A customer receives a partial refund of the sales price after the customer discovers a flaw in the merchandise. The customer keeps the merchandise.

Sales allowance

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year

The Sales Returns and Sales Allowances accounts are classified as

Contra revenue accounts

Is 'balance in savings account' cash or cash equivalent?

Yes

Which of the following are detective controls?

Audits Performance reviews Reconciliations

The formula to compute the receivables turnover ratio is net credit sales divided by

Average accounts receivable

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

The asset that is most susceptible to employee fraud is

Cash

Internal control over cash is important because

Cash can be stolen.

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

Which of the following are internal controls for checks?

Checks for large amounts should require two signatures. Checks should be sequentially prenumbered.

Which of the following items are included in cash?

Checks from customers Balance in checking accounts Currency and coins

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

Checks outstanding

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection from customers Receipt of interest

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection of an accounts receivable Interest received on notes receivable

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 accounting term for a situation where two or more people act in coordination to circumvent internal controls is

Collusion

When two or more persons work together to circumvent internal control procedures and commit a fraud, this is called

Collusion

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

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

Policies and procedures that help ensure management's directives are being carried out

Control activities

Formal policies related to management's philosophy, assignment of responsibilities, and organizational structure

Control environment

Which of the following are components of internal control?

Control environment Control activities Monitoring Risk assessment

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

Credit sales

The bank will show a customer's deposit on bank statements as a ______.

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

Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n)

Current asset

Which of the following entries affect a company's cash flows?

Debit rent expense; credit cash Debit supplies; credit cash

Lindell sells $100 of goods to a customer. The customer pays with a personal check. Recording this transaction will include a

Debit to Cash.

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

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

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

When adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance?

Deposits 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.

The two types of control procedures are preventive and

Detective

Which of the following is an internal control procedure for cash disbursements?

Disbursements should be made by check, debit, or credit card

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

Errors, mistakes, or fraud

True or false: The entry for a sale to customers is different depending on whether the customer pays with cash or a check.

False

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

The three classifications on the statement of cash flows are cash flows from

Financing activities. Operating activities. Investing activities.

An intentional error by an employee that results in theft is referred to as a ______.

Fraud

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

Fraud

Which of the following are common controls over cash receipts?

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

A key factor in helping safeguard cash is a well functioning

Internal control system

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

Internal controls

Includes formal procedures for reporting control deficiencies

Monitoring

Is 'accounts receivable' cash or cash equivalent?

No

Is 'inventory for sale to customers' cash or cash equivalent?

No

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

Notes collected by the bank NSF checks

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Payment of an accounts payable balance Payment of salaries

The actual performance of individuals or processes should be checked against their expected performance

Performance reviews

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

Petty cash fund

Two types of control activities are

Preventive and detective controls.

To prevent improper use of the company's resources, only certain employees are allowed to carry out certain business activities

Proper authorization

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Purchase of supplies with cash Payment of employee salaries Interest paid on notes

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

Reconciliation

Management should periodically determine whether the amounts of physical assets of the company match the accounting records

Reconciliations

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

Companies that are required to file with the SEC

The Sarbanes-Oxley Act

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

The bank paid interest that the company has not recorded. The bank made an error in recording a deposit made by the company. 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.

Which of the following are errors in accounting for cash?

The bank processing a check for $210 as $120. Recording a check for $168 for $186 in the cash account. Recording a cash collection of $4,000 but depositing $3,000 into the bank.

Who is responsible for providing an opinion on management's assessment of internal control?

The company's auditors

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

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

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

Timing differences Errors

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.

What is the primary purpose of a bank reconciliation?

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

Is 'checks' cash or cash equivalent?

Yes

Is 'currency' cash or cash equivalent?

Yes

Is 'investments purchased with maturities of less than three months' cash or cash equivalent

Yes

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

to the company preparing the bank reconciliation