ACCT 2013H Chapter 4 Smartbook

internal controls

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as a) protective controls b) general controls c) corporate regulations d) security controls e) internal controls

detective

A periodic performance review is an example of a _____________ control.

petty cash

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

short-term asset

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

checks outstanding

Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called a) NSF checks b) deposits outstanding c) electronic funds transfers d) checks outstanding

deposits outstanding

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are a) electronic funds transfers b) NSF checks c) deposits outstanding d) checks outstanding

errors

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

timing

If a company records a transaction before the bank records the same transaction, this is called a _____________ difference.

reconciliation

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

Smith

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? a) Smith b) Jones c) both are about the same

ending cash on the balance sheet date

The amount of cash in the balance sheet reflects the a) b) amount of cash spent during the period c) cash inflows to the company from selling goods and services d) cash expected to be used in the following year

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.

fraud

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

Separation of duties, Physical controls

Which of the following are preventive controls? a) Performance reviews b) Reconciliations c) Separation of duties d) Physical controls

the ending balance of cash in the accounting records

A bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals a) the cash flows from operating activities b) the ending balance of cash in the accounting records c) purchases for the period d) the total cash debits recorded in the accounting period

provide accurate and reliable accounting information, safeguard company assets

Internal control consists of plans to a) provide accurate and reliable accounting information b) report management errors to the police c) report misuse of company assets to investors d) safeguard company assets

misuse of company resources

The most common source of occupational fraud is: a) financial statement manipulation b) false advertisement c) misuse of company resources d) employee misrepresentation

Charges for NSF checks, Service charges

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? a) Charges for NSF checks b) Deposits outstanding c) Outstanding checks d) Service charges

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

Which of the following are common controls over cash receipts? a) having two different employees take custody of the checks and make the deposit b) placing one trusted employee in charge of all cash-related activities c) reducing the amount of total sales to customers d) opening mail daily and making a detailed list of checks received

Performance reviews, Reconciliations, Audits

Which of the following are detective controls? a) Performance reviews b) Reconciliations c) Physical controls d) Proper authorization e) Audits

Balance in checking accounts, Currency and coins, Checks from customers

Which of the following items are included in cash? a) Balance in checking accounts b) Currency and coins c) Checks from customers d) Notes receivable from customers e) Accounts receivable from customers

Accounts receivable from customers

Which of the following items are not included in cash? a) Accounts receivable from customers b) Currency and coins c) Cash in savings account d) Balance in checking accounts

Notes collected by the bank, NSF checks

Which of the following items will require a journal entry following a bank reconciliation? a) Notes collected by the bank b) Outstanding checks c) NSF checks d) Deposits outstanding

cash

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

error

An ____________ is a mistake in accounting, which can be intentional or unintentional.

balance sheet, 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: a) balance sheet b) statement of stockholders' equity c) income statement d) statement of cash flows

preventive

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

preventive and detective controls

Two types of control activities are a) asset and liability controls b) preventive and detective controls c) operating and investing controls d) investor and creditor controls

The company made an error in recording a deposit, 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

What would cause a bank statement not to agree with the cash balance in the accounting records? a) The company wrote checks that have cleared the bank b) The company made an error in recording a deposit c) The bank made an error in recording a deposit made by the company d) The bank paid interest that the company has not recorded e) Deposits outstanding that have been recorded on the company's records, but not on the bank's

decrease

When a company finds out that an NSF check was written to the company, the company must __________ the balance in the cash account. a) increase b) decrease

timing differences and errors

A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to a) timing differences and errors b) accrual revenues being different from cash revenues c) uncollected customer accounts d) cash flows from operating activities

designing an internal control system

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for a) designing an internal control system b) preparing useful financial statements c) auditing internal control systems d) designing fraud-proof accounting system

cash

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

Committee of Sponsoring Organizations (COSO) of the Treadway Commission

The framework for designing an internal control system is provided by the a) Public Companies Accounting Oversight Board (PCAOB) b) Financial Accounting Standards Board c) Securities and Exchange Commission Act of 1934 d) Committee of Sponsoring Organizations (COSO) of the Treadway Commission

Errors, Timing differences

Which of the following will cause differences between the bank statement balance and the accounting balance for cash? a) Debit card payments by customers b) Errors c) Checks that are processed the same day as they are written d) Timing differences

cannot be paid because the account does not contain enough funds

A check that is NSF (nonsufficient funds) is a check that a) cannot be paid because the account does not contain enough funds b) was drawn on an account that has been closed c) cannot be paid because the bank does not have the money

small amounts of cash needed for low-cost items

A petty cash fund is used for a) routine purchases of inventory and required necessities b) small amounts of cash needed for low-cost items c) larger items purchased that were not in the budget

Depositing checks into the bank and recording receipts in the accounting records, 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? a) Depositing checks into the bank and recording receipts in the accounting records b) Opening the mail and deposit of checks in the bank c) Opening the mail and making a list of checks received d) Accepting credit cards and accepting cash

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? a) Adjustments to the bank balance for items recorded on the books but not yet on the bank statement b) Both the adjustments to the bank balance and adjustments to the cash balance in the accounting records c) Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

reconciliation

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

The balance sheet and statement of cash flows

The ending balance in cash is reported in which financial statement(s)? a) The statement of cash flows only b) The balance sheet and statement of cash flows c) The balance sheet and income statement d) The balance sheet only

misuse of company resources, financial statement manipulation

The two most common sources of occupational fraud are: a) personal tax evasion b) misuse of company resources c) employee misrepresentation to outside stakeholders d) financial statement manipulation

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 ______________.

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? a) Deposits outstanding b) Outstanding checks c) Collections of funds by the bank d) Charges for NSF checks

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

Which of the following are errors in accounting for cash? a) The bank processing a check for $210 as $120 b) The bank charges a service charge for $100 on January 10, but the retail company does not record this charge until the bank statement is received c) Recording a cash collection of $4,000 but depositing $3,000 into the bank d) Recording a check for $168 for $186 in the cash account

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

Which of the following steps are necessary to reconcile the bank balance and the cash account balance. a) Record items that reconcile the bank's cash balance b) Adjust bank's cash balance c) Record items that reconcile the company's cash balance d) Adjust the company's cash balance