ACC211 Chapter 4 learning assignment

The employee responsible for the petty cash fund is often referred to as the petty cash _.

custodian

The journal entry necessary to establish a petty cash fund is:

debit petty cash credit cash

The bank will show a customer's withdrawal as a _.

debit, because a withdrawal decreases its liabilities from the bank's POV

In a bank reconciliation, the bank's charge of $10 for checking account fees is

deducted from the book balance

When adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance?

deposits outstanding

The committee of sponsoring organizations (coso) of the tread way commission provided a framework for

designing an internal control system.

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

detective

The amount of cash in the balance sheet reflects the

ending cash on the balance sheet date

The two reasons why companies may issue incorrect financial statements are fraud and

error

Difference between the bank statement balance and the accounting balance for cash are primarily caused by timing differences and _.

errors

Internal control components are built on the foundations of the _ tone established by top management in its control environment.

ethical

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

false

The repayment of promissory notes and the payment of dividends are classified as _ activities on the statement of cash flows.

financing

An intentional error by an employee that in theft is referred to as a _.

fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as _.

fraud

The acceptance of credit cards _ internal control over cash.

increases

The statement of cash flows provides information about the cash inflows and cash outflows of an entity. For financing activities, a cash _ occurs when cash is borrowed from a creditor, and a cash _ occurs when a loan is repaid.

inflow, outflow

For a toy manufacturer, slippery floors in the factory are an example of what type of risk?

internal

For internal control purposes, risk assessment considers which two types of risk?

internal and external risks

Because most companies receive payments for the sale of products and services either in the form of cash or as a check received through the mail,

internal control over cash receipts is important

A company's plan to adhere to policies and procedures, promote operational efficiency, minimize errors and theft, and enhance the reliability and accuracy of accounting data are referred to as

internal controls

A key factor in helping safeguard is a well functioning _ _ system.

internal, control

The two most common sources of occupational fraud are:

misuse of company resources. financial statement manipulation.

The three elements present in every fraud are:

motive, opportunity, rationalization

The acronym NSF stands for

non sufficient funds

Auditors of public companies are prohibited from providing _ services for their audit clients.

nonaudit

The amount of cash flows classifies items as

operating, investing, and financing.

The statement of cash flows provides information about the cash inflows and cash outflows of an entity. The purchase of a long-term investment is a cash_ from investing activities, where sale of a long-term investment is a cash_from investing activities.

outflow inflow

Which of the following are preventive controls?

physical controls separation of duties

Separation of duties and E-commerce control are examples of _ controls.

preventive

What kind of control is separation of duties?

preventive

Two types of control activities are

preventive and detective controls

Debit and credit card used by employees in the course of fulfilling their employment objective are commonly referred to as _.

purchase cards

Debits and credits cards used by employees in the course of fulfilling their employment objective are commonly referred to as _.

purchase cards

Which of the following are cash outflows from investing activities?

purchase of building purchase of land purchase of long-term investments

Preparation of a bank _ helps maintain control of cash accounts.

reconciliation

Strong internal control systems allow greater reliance by investors on:

reported financial statements

The key provisions of the sarbanes-oxlet act include

requiring that corporate executives certify financial statements. restricting activities of auditors to prevent conflicts of interest. requiring documentation and assessing effectiveness of internal controls.

Which of the following cash transactions are classified as cash inflows from investing activities?

sale of equipment sale of building sale of held-to-maturity investments

Which of the following cash transactions are classified as cash inflows from investing activities?

sale of land sale of available-for-sale securities

which of the following represents a critical component of a well functioning internal control system?

separation of duties

a petty cash fund is used for

small amounts of cash needed for low-cost items

Short-term highly liquid investments with a maturity of _ months or less that can be readily converted to cash with little risk of loss are classified as cash equivalents.

three

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

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

timing

Since debit cards withdraw funds directly from the cardholder's bank account at the time of use, a sale on a debit card is most similar to a sale

with a check

A journal entry that affects a company's statement of cash flows will include an inflow or outflow of _.

cash

The asset most susceptible to theft is

cash

The asset that is most easily stolen and susceptible to fraud is _.

cash

Which of the following items are included in cash?

checks from customers currency and coins balance in checking accounts

The accounting term for a situation where two of more people act in coordination to circumvent internal controls is _.

collusion

The sarbanes-oxley applies to

companies that are required to file with the sec.

Indicate whether each item is a cash inflow or a cash outflow from operation activities.

Cash inflow: collection on account. Sales of services for cash. Cash outflow: Payment on account. Payment of salaries.

List the steps for a bank reconciliation in the correct order.

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

To segregate duties involving cash receipts, specific responsibilities are assigned to various employees. Put the following steps in the correct chronological order.

1. cashiers are responsible for collecting cash and issuing a receipt at the point of sale 2. a supervisor is responsible for collecting the cash at the end of each cashier's shift 3. members of the accounting department are responsible for ensuring that cash sales are properly recorded

Which of the following are common controls over cash receipts?

1.having 2 diff employees take charge of checks and making deposit 2. opening mail daily and making detailed list of checks received 3. reducing proportion of transactions that involve cash

which of the following are not included in cash?

Accounts receivable from customers

Internal control procedures for cash disbursements (other than small disbursements from petty cash) should include that

All disbursements are made by check, debit card, or credit card. Check are signed by authorized individuals. All expenditures are authorized.

When preparing the bank reconciliation for March, the accountant for ABC Company discovered that a $694 check in a payment of an account payable had been entered incorrectly in the journal as $649. Which of the following is true?

An adjusting entry must be made to debit accounts payable and credit Cash for $45.

Who must personally certify the financial statements and company disclosures or risk financial penalties and criminal prosecution for fraudulent misstatements?

corporate executives

Which of the following responsibilities are separated in a good internal control system for cash disbursements?

Check writing and check signing. Cash disbursement documentation and the accounting recordings function.

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

Checks outstanding.

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

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

which of the following is an internal control procedure for cash disbursements?

Disbursements should be made by check, debit , or credit card.

Which of the following is an internal control procedure for cash disbursements?

Disbursements should be made by check, debit, or credit card.

Which of the following led to the passage of the Sarbanes-Oxley act of 2002?

High profile accounting scandals during the earl 2000s.

Which of the following are cash inflows from financing activities?

Issuing stock to investors for cash Borrowing from bank

Which of the following might be included in cash equivalents on the balance sheet?

Money Market funds Treasury bills

Match each component of internal control with with its definition

Monitoring-Includes formal procedures for reporting control deficiencies Control activities-Policies and procedures that help ensure management's directives are being carried out Risk Assessment-Identifies and analyzes factors that could prevent objectives from being achieved. Control environment-Formal policies related to management's philosophy, assignment of responsibilities, and organizational structure.

which of the following will require a journal entry following a bank reconciliation?

NSF checks Notes collected by the bank

Which of the following will require a journal entry following a bank reconciliation?

Notes collected by the bank NSF checks

Which of the following is classified as part of the control environment?

Overall ethical tone of the organization with respect to internal control

Which of the following are detective controls?

Performance reviews Reconciliations Audits

Match each activity with its classification on the statement of cash flows.

Purchasing inventory from vendors - operating activity Signing a long-term promissory note-Financing activity Selling equipment- investing activity

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

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

Internal control consists of plans to

Safeguard company assets. minimize errors and theft. encourage adherence to company policies and procedures.

Match each activity with its classification on the statement of cash flows.

Sell goods to customers - operating activity Sell stock to investors - financing activity Purchase equipment - Investing activity

Under the Sarbarnes-Oxley act, who is responsible for the selection of a corporation's auditor?

The audit committee of the Board of Directors.

The ending balance in cash is reported in which financial statements?

The balance sheet and statement of cash flows

The individual or groups of individuals who are most able to override internal control features is (are):

Top management

A company pays for a purchase with a credit card. What is the effect of the purchase on the accounts?

accounts payable will increase

Employee purchases should be included in the accounting records

by the end of the accounting period