Chapter 4 Accounting

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

internal controls.

To pay for minor purchases, companies keep some cash on hand in a petty cash fund. At the end of the period, expenditures from the petty cash fund are recorded with a debit to Miscellaneous Expense and a credit to Cash, and the fund is replenished.

True

A(n) Blank 1, difference in cash occurs when a company records a transaction either before or after the bank records the same

timing

On November 5, Phelps Outerwear sells a coat on account to a customer for $200. On November 15, the customer decides to return the coat to the retailer. The journal entry on November 15 will include a:

Debit to sales returns

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

checks outstanding.

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

designing an internal control system.

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

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

petty cash

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

reconciliation

Which of the following items are not included in cash?

Accounts receivable from customers

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

Blank 1: fraud or fraudulence

Preparation of a bank _____helps maintain control of cash accounts.

Blank 1: reconciliation, recon, reconciliaition, or reconcilation

How are trade discounts recognized?

By recording the sale at a discounted price

Internal control consists of plans to

provide accurate and reliable accounting information. safeguard company assets.

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.)

services charges Charges for NSF fees

List the steps for a bank reconciliation in the correct order

1. Adjust the banks cash balance 2. Adjust the company's bank balance 3. Update the company's cash account by recording items identified in the previous step.

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

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

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 framework for designing an internal control system is provided by the

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

On May 1, Arden Wholesale sells $800 worth of goods on account to an out-of-state customer. Upon receiving the order on May 7, the customer notifies Arden that approximately 5% of the goods arrived damaged. As a result, Arden reduces the amount owed by the customer by $50. The journal entry by Arden Wholesale on May 7 will include a:

Credit to accounts receivable

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

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

Opening the mail and deposit of checks in the bank Depositing checks into the bank and recording receipts in the accounting records

Deposits outstanding are additions to the balance per bank and checks outstanding are subtractions from the balance per bank.

True

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

decrease

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

Fraud

The asset that is most susceptible to employee fraud is

cash.

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

Which of the following items are included in cash?

Checks from customers Currency and coins Balance in checking accounts