Ch 6 LearnSmart

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the following entries is correct to record cash sales and the shortage. A. Debit Cash $102 and credit Sales $102. B. Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102. C. Debit Cash $102; credit Cash Over and Short $2; and credit Sales $102. D. Debit Cash $100; credit Cash Over and Short $2; and credit Sales $102.

B. Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

Review the items below and determine which would cause an increase in the monthly bank statement balance. A. Cash deposits made by the account owner B. Service fees charged by the bank C. Checks written during the month D. A customer's NSF check

A. Cash deposits made by the account owner

Given the bank reconciliation below, show what the effect on the Cash balance in the general ledger will be by selecting all of the correct answers below. XYZ Co. Bank Reconciliation August 30, 2012 BANK Bank balance $2,005 Add: Deposit in transit 300 Less: Outstanding checks 185 Adjusted bank balance $2,120 BOOK Book Balance $2,250 Add: interest earned 50 Less: NSF check 180 Adjusted book balance $2,120 a. Cash will be credited by $185 for the outstanding checks. b. Cash will be debited by $50 for the interest earned. c. Cash will have an adjusted balance of $2,120 after posting the required adjustments. d. Cash will be credited by $180 for the NSF check e. Cash will have an adjusted balance of $1,250 after posting the required adjustments f. Cash will be debited for the $300 deposit in transit

b. Cash will be debited by $50 for the interest earned. c. Cash will have an adjusted balance of $2,120 after posting the required adjustments. d. Cash will be credited by $180 for the NSF check

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for_______ (large/small) payments in order to ________ (increase/avoid) the time and cost of writing checks for _________ (large/small) amounts.

small; avoid; small

Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each it its definition on the right. 1. Outstanding check 2. Deposit in transit 3. NSF check 4. Bank charges A. A check written by a customer who does not have enough money in his account to cover the check B. A check written by the depositor that has not yet been received by the bank for payment C. Deposit made and recorded by the depositor, but not yet recorded on the bank statement D. Service fees charged by the bank

1. = B 2. = C 3. = A 4. = D

Internal control policies and procedures have limitations that arise from many elements. Match the limitation on the left with its definition on the right. 1. Human error 2. Human fraud 3. Cost-benefit principle 4. Internal Control environment a. Involves intent by people to defeat internal controls for personal gain b. Dictates that the costs of internal controls must not exceed their benefits c. Can occur from carelessness, misjudgment or confusion d. Management must convey commitment to internal control policies and procedures

1. = c. 2. = a. 3. = b. 4. = d.

Identify the item below that would be added to the book balance. A. NSF check B. Interest earned C. Bank service charge D. Outstanding checks

B. Interest earned

Jackson Brothers decided to create a petty cash fund. They estimated that $200 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below. A. Miscellaneous Expense is debited for $200; Cash is credited for $200. B. Cash is debited for $200; Petty Cash is credited for $200 C. Petty cash is debited for $200; Cash is credited for $200 D. Petty cash is credited for $200; Miscellaneous Expense is debited for $200

C. Petty cash is debited for $200; Cash is credited for $200

Calculate the adjusted cash balance per the books of XYZ Co. given the following information. Balance per bank statement - $600 Balance per general ledger cash account - 710 Deposit in transit - 200 Note collected by the bank on behalf of the depositor - 80 Monthly bank charges - 40 Outstanding checks - 50 A. $950 B. $990 C. $630 D. $750

D. $750

T/F: The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled.

True

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business. a. A check is drawn by the company cashier to establish the petty cash fund. b. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time. c. When the fund is replenished, the Petty Cash fund account is debited. d. The petty cashier is responsible for making payments from the petty cash fund. e. The petty cashier is responsible for keeping the cash in the fund safe. f. Any employee may disburse cash from the fund as long as they bring back a receipt for their purchase.

a. A check is drawn by the company cashier to establish the petty cash fund. b. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time. d. The petty cashier is responsible for making payments from the petty cash fund. e. The petty cashier is responsible for keeping the cash in the fund safe.

Determine which of the statements below describes a petty cash receipt a. A petty cash receipt will have a signature line for the person receiving a disbursement from the fund. b. All petty cash receipts are turned in to the company cashier at the end of each day. c. The petty cashier must present all paid receipts to the company cashier in order to replenish the fund d. A petty cash receipt is rarely prenumbered. e. A petty cash receipt is sometimes called a petty cash ticket f. Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt.

a. A petty cash receipt will have a signature line for the person receiving a disbursement from the fund. c. The petty cashier must present all paid receipts to the company cashier in order to replenish the fund e. A petty cash receipt is sometimes called a petty cash ticket f. Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt.

Identify the bank reconciliation items that would require adjustments to the book balance. a. Collection of note by bank b. Interest earned c. Outstanding checks d. Bank charges e. NSF check f. Deposits in transit

a. Collection of note by bank b. Interest earned d. Bank charges e. NSF check

Recall the preparation of a bank reconciliation by selecting the correct items below a. Identify any deposits in transit and add to the balance per bank. b. Compute the adjusted bank balance. c. Identify any deposits in transit and add to the balance per books. d. Identify and list any unrecorded debit memoranda from the bank and add to the balance per bank. e. Identify and list any outstanding checks and subtract from the balance per bank. f. Compute the adjusted book balance.

a. Identify any deposits in transit and add to the balance per bank. b. Compute the adjusted bank balance. e. Identify and list any outstanding checks and subtract from the balance per bank. f. Compute the adjusted book balance.

Describe the internal control principle of separating recordkeeping from custody of assets by completing the following sentence. A person who _______________ (identifies/controls/recommends) or has access to an asset must __________ (always/not/) keep that asset's accounting records.

controls; not

Choose the items below that would be subtracted from the book balance on a bank reconciliation. a. Cleared checks b. Interest earned on the depositor's account c. Outstanding checks d. NSF customer check e. Monthly check charges assessed by the bank f. Monthly bank service charge g. Note collected by the bank for the depositor

d. NSF customer check e. Monthly check charges assessed by the bank f. Monthly bank service charge