Ch.6: Cash, Fraud, & Internal Controls

Review the following statements and select the ones which accurately describe a Petty Cash fund

-It is established to pay for small payments like low-cost supplies and shipping fees, etc. -It is an asset reported on the balance sheet.

Determine which of the items below would appear in the Deposits column of a bank statement and would cause an increase in the account's balance.

-Interest paid by the bank on the bank account balance -A note collected by the bank on behalf of the account owner -Deposits made during the month

Which of the answers below correctly describe the Cash Over and Short account?

-It is an income statement account. -A debit balance reflects an expense. -It records the effects of cash overages and cash shortages.

Each of the following are types of technological impacts related to internal control:

-new evidence of processing -reduced processing errors more extensive -testing of records -separation of duties

Which of the following are correct regarding why management uses internal controls

-protect assets. -uphold company policies. -ensure reliable accounting. -promote efficient operations.

Identify the item below that would be added to the book balance.

Interest earned

Which statement below explains why liquid assets are needed in a business?

Liquid assets must be available to pay current liabilities.

Select the items below that would cause the bank statement balance to differ from the depositor's book balance.

NSF check, Deposit in transit, interest paid by bank

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.

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

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation

The adjusted bank balance must equal the adjusted cash balance per books.

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

A good internal control to protect cash is to make cash payments using Multiple choice question.

checks

Auditors focus more on testing the ____ of a company's blockchain processes and technology than on verifying the ___ of its output. Multiple choice question.

effectiveness/accuracy

The primary objective of internal control procedures is to safeguard the business against theft from government agencies.

false

Good recordkeeping helps protect assets and helps managers:

monitor company activities

Responsibility for a task should be clearly established and assigned to:

one person

Determine which of the statements below accurately describe services provided by a bank.

-A bank account is a record set up by a bank for a customer. -Each bank deposit is supported by a deposit ticket. -To withdraw money from an account, the depositor can use a check.

Determine which of the statements below describes a petty cash receipt

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

Which of the statements below describe the goals and principles of cash management?

-Encourage quick collection of receivables. -Plan cash receipts to meet cash payments when due. -Keep a minimum level of cash necessary to operate. -Money should be spent only when it is available.

Identify the principles of internal control by selecting the correct answers below.

-Establish responsibilities. -Maintain adequate records. -Apply technological controls. -Insure assets. -Separate recordkeeping from custody of assets. -Perform regular and independent reviews.

Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period

-Expenses would not be recorded in the period in which they were incurred. -The income statement would reflect a net income amount that was too high. -The balance sheet would show an overstated cash asset.

Which of the statements below describe the goals and principles of cash management?

-Plan cash receipts to meet cash payments when due. -Money should be spent only when it is available. -Encourage quick collection of receivables. -Keep a minimum level of cash necessary to operate.

Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below.

-Reliable records are a source of information that managers use to monitor activities. -Keeping detailed records makes it unlikely that assets are lost or stolen without detection.

Which of the statements below explains how technology has impacted internal control systems?

-Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. -Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft. -Technology has reduced the number of processing errors.

Which of the statements below explains how technology has impacted internal control systems?

-Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. -Technology has reduced the number of processing errors. -Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft.

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy.

-The Cash account will be debited for $105. -The Sales account will be credited for $100. -The Cash Over and Short account will be credited for $5. -The extra $5 collected will be treated as a miscellaneous revenue.

Determine the statements below that are true regarding why a bank reconciliation is used.

-Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. -The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. -We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two.

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence. Position 1 of 6 Enter the bank statement balance then add any unrecorded deposits and subtract any outstanding checks. correct toggle button unavailable Enter the bank statement balance then add any unrecorded deposits and subtract any outstanding checks.

1. Enter the bank statement balance then add any deposits in transit and subtract any outstanding checks 2. Compute the adjusted bank balance 3. Enter the company's book balance 4. Add any unrecorded cash receipts, interest earned, and errors understating the book balance 5. Subtract any unrecorded bank fees, NSF checks, and errors overstating the book balance 6. Compute the adjusted book balance and compare it to the adjusted bank balance to verify equality

At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $46. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account by choosing the correct action from those given below. Multiple choice question.

Cash is credited for $96.

Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to him/herself.

false

What is the purpose of internal controls?

to protect assets and ensure reliable accounting

Internal control procedures should be designed to protect assets from waste and theft.

true

Separation of recordkeeping for assets from the custody over assets helps reduce fraud.

true