Chapter 8 Acct T/F

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Cash equivalents are short-term investments that will be converted to cash within 120 days.

False

For efficiency of operations and better control over cash, a company should maintain only one bank account

False

If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.

False

If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded cash overages for the period.

False

In establishing a petty cash fund, a check is written for the amount of the fund and is recorded as a debit to accounts payable and a credit to petty cash

False

In preparing a bank reconciliation, the amount indicated by a debit memorandum for bank service charges is added to the balance per depositor's records

False

In preparing a bank reconciliation, the amount of a check omitted from the journal is added to the balance per depositor's records

False

In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement

False

In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement

False

Money market accounts, commercial paper, and United States Treasury Notes are examples of cash equivalents

False

Most companies who have several bank accounts, petty cash, and cash on hand, would list each separately on the balance sheet

False

Sarbanes-Oxley requires companies to maintain a strong and effective internal control and thus prevent fraud and misleading financial statements

False

Sarbanes-Oxley's purpose is to improve financial reporting

False

Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting

False

The bank often informs the depositor of bank service charges by including a credit memorandum with eh monthly bank statement

False

The bank reconciles its statement to the depositor's records

False

The sum of the money on hand and petty cash receipts in a petty cash fund will always be equal to the balance in the petty cash account

False

When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.

False

A customer's check received in settlement of an account receivable is considered cash

True

A payment system that uses computerized electronic impulses to effect a cash transaction is called electronic funds transfer (EFT)

True

A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid

True

A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment

True

A voucher is a written authorization to make a cash payment

True

A voucher system is an example of an internal control procedure over cash payments

True

All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts

True

An example of good internal controls over cash payments is the taking of all cash discounts offered.

True

Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records

True

Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash

True

Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash

True

Expenditures from a petty cash fund are documented by a petty cash receipt

True

For strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees

True

If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement

True

In preparing a bank reconciliation, the amount indicated by a credit memorandum for a not receivable collected by the bank is added to the balance per depositor's records

True

In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per depositor's records

True

Internal control is enhanced by seperating the control of a transaction from the record-keeping function

True

Money orders are considered cash

True

A check outstanding for two consecutive months will appear only on the first month's bank reconciliation

False

A compensating balance occurs when a bank may require a depositor to maintain a maximum cash balance

False

A petty cash fund is used to pay relatively large amounts

False

After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per depositor's records as well as items in the balance per bank statement

False

A backlog in recording transactions is an example of a warning sign from the accounting system

True

A business who requires that all cash payments by made by check, can not use a petty cash system

True

A check for $456 was erroneously charged by the bank as $654. In order for the bank reconciliation to balance, you must add $198 to the bank statement balance

True

The Sarbanes-Oxley's Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures

True

The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date

True

The bank reconciliation is an important part of the system of internal controls

True

The control environment in an internal control structure is the attitude and awareness of internal control by all employees

True

The doomsday ratio includes both cash and cash equivalents in the numerator

True

The main reason that the bank statement cash balance and the depositor's cash balance do not initially balance is due to timing differences

True

When a clerk enters a sale and the customer can see the amount displayed and is given a cash receipt, this is an example of a preventive control

True

When the voucher system is used, the amount due on each voucher represents the credit balance of an account payable if the voucher is in full payment to a creditor

True


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