Accounting 101 Chapter 7 (Practice Multiple-Choice Questions)

11. (LO 3) The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is: a. outstanding checks. b. deposit in transit. c. a bank error. d. bank service charges.

d. bank service charges.

8. (LO 2) The use of prenumbered checks in disbursing cash is an application of the principle of: a. establishment of responsibility. b. segregation of duties. c. physical controls. d. documentation procedures

d. documentation procedures

5. (LO 1) Which of the following was not a result of the Sarbanes-Oxley Act? a. Companies must file financial statements with the Internal Revenue Service. b. All publicly traded companies must maintain adequate internal controls. c. The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity. d. Corporate executives and boards of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so.

a. Companies must file financial statements with the Internal Revenue Service.

*16. (LO 5) A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $4 in cash. In recording the check: a. debit Cash Over and Short for $2. b. debit Petty Cash for $94. c. credit Cash for $94. d. credit Petty Cash for $2.

a. debit Cash Over and Short for $2.

9. (LO 3) The control features of a bank account do not include: a. having bank auditors verify the correctness of the bank balance per books. b. minimizing the amount of cash that must be kept on hand. c. providing a double record of all bank transactions. d. safeguarding cash by using a bank as a depository.

a. having bank auditors verify the correctness of the bank balance per books.

14. (LO 4) Which of the following would not be an example of good cash management? a. Provide discounts to customers to encourage early payment. b. Invest temporary excess cash in stock of a small company. c. Carefully monitor payments so that payments are not made early. d. Employ just-in-time inventory methods to keep inventory low.

b. Invest temporary excess cash in stock of a small company.

7. (LO 2) Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of: a. segregation of duties. b. establishment of responsibility. c. independent internal verification. d. human resource controls.

b. establishment of responsibility.

4. (LO 1) Physical controls do not include: a. safes and vaults to store cash. b. independent bank reconciliations. c. locked warehouses for inventories. d. bank safety deposit boxes for important papers.

b. independent bank reconciliations.

12. (LO 4) Which of the following items in a cash drawer at November 30 is not cash? a. Money orders. b. Coins and currency. c. An NSF check. d. A customer check dated November 28.

c. An NSF check.

13. (LO 4) Which statement correctly describes the reporting of cash? a. Cash cannot be combined with cash equivalents. b. Restricted cash funds may be combined with cash. c. Cash is listed first in the current assets section. d. Restricted cash funds cannot be reported as a current asset.

c. Cash is listed first in the current assets section.

1. (LO 1) Which of the following is not an element of the fraud triangle? a. Rationalization. b. Financial pressure. c. Segregation of duties. d. Opportunity.

c. Segregation of duties.

10. (LO 3) In a bank reconciliation, deposits in transit are: a. deducted from the book balance. b. added to the book balance. c. added to the bank balance. d. deducted from the bank balance.

c. added to the bank balance.

3. (LO 1) The principles of internal control do not include: a. establishment of responsibility. b. documentation procedures. c. management responsibility. d. independent internal verification.

c. management responsibility.

2. (LO 1) Internal control is used in a business to: a. safeguard its assets. b. enhance the accuracy and reliability of its accounting records. c. ensure compliance with laws and regulations. d. All of these answer choices are correct.

d. All of these answer choices are correct.

6. (LO 1) Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system? a. Establishment of responsibility. b. Segregation of duties. c. Independent internal verification. d. All of these control activities are relevant to a computerized system.

d. All of these control activities are relevant to a computerized system.

15. (LO 4) Which of the following is not one of the sections of a cash budget? a. Cash receipts section. b. Cash disbursements section. c. Financing section. d. Cash from operations section.

d. Cash from operations section.