BA 211 ch 4 smartbook

The amount of cash in the balance sheet reflects the

ending cash on the balance sheet date.

Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n) - -. (Enter only one word per blank.)

Blank 1: current, short-term, short term, or shortterm Blank 2: asset

Which of the following are internal controls for checks?

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

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

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

Which of the following items will require a journal entry following a bank reconciliation? (Select all that apply.)

Notes collected by the bank NSF checks

Which of the following are detective controls?

Performance reviews Audits Reconciliations

In a bank reconciliation, a deposit outstanding is

added to the bank balance

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

checks outstanding.

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

debit to Cash.

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

deposits outstanding.

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

fraud

The acronym NSF stands for

nonsufficient funds.

Which of the following are common controls over cash receipts? (Select all that apply.)

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

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

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 bank reconciliation is a procedure used to determine if the cash balance in the bank statement equals

the ending balance of cash in the accounting records.

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

Which of the following items are not included in cash?

Accounts receivable from customers

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

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

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

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

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

False

Who has final responsibility for internal controls?

Management

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

Sarbanes-Oxley Act.

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

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

The company's auditors

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

designing an internal control system.

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

timing

Which of the following items are included in cash?

Checks from customers Balance in checking accounts Currency and coins

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 led to the passage of the Sarbanes-Oxley Act of 2002?

High profile accounting scandals during the early 2000s

Which of the following are errors in accounting for cash?

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. The bank processing a check for $210 as $120.

Which of the following are preventive controls?

Separation of duties Physical controls

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? (Select all that apply.)

Service charges Charges for NSF checks

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. 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. The bank made an error in recording a deposit made by the company.

What is the primary purpose of a bank reconciliation?

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

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

balance sheet statement of cash flows

The asset that is most easily stolen and susceptible to fraud is -. (Enter one word per blank)

cash

The asset that is most susceptible to employee fraud is

cash

The Sarbanes-Oxley Act applies to

companies that are required to file with the SEC.

When a company finds out that an NSF check was written to the company, the company must ______ the balance in the cash account.

decrease

In a bank reconciliation, an outstanding check is ______.

deducted from the bank balance

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

detective

The two types of control procedures are preventive and -. (Enter one word per blank)

detective

When a person intentionally deceives another person or company for personal gain, this is referred to as -. (Enter one word per blank)

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 most common source of occupational fraud is:

misuse of company resources

The two most common sources of occupational fraud are:

misuse of company resources financial statement manipulation

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

operating activities. financing activities. investing activities.

The statement of cash flows classifies items as

operating, investing, financing

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

preventive

Two types of control activities are

preventive and detective controls

A petty cash fund is used for

small amounts of cash needed for low-cost items.

A(n) - difference in cash occurs when a company records a transaction either before or after the bank records the same transaction. (Enter only one word.)

timing

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

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n) -- fund. (Enter one word per blank.)

Blank 1: petty Blank 2: cash

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

Errors Timing differences

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

The balance sheet and statement of cash flows

Paying by check helps a business to control cash when the ______. (Select all that apply.)

checks are prenumbered and written sequentially check is signed by an authorized manager

The accounting term for a situation where two or more people act in coordination to circumvent internal controls is - (Enter one word per blank).

collusion

A(n) - is a mistake in accounting, which can be intentional or unintentional. (Enter one word per blank)

error

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and -. (Enter only one word.)

errors