Accounting Chapter 4 Smartbook

Which of the following items will require a journal entry following a bank reconciliation? - Notes collected by the bank - Deposits outstanding - Outstanding checks - NSF checks

- Notes collected by the bank - NSF checks

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

True or false: Variability in operating cash flows is unimportant as long as the total cash flows over a three-year period is sufficiently positive.

False

Which of the following items are not included in cash? - currency and coins - accounts receivable - cash in savings account - balance in checking accounts

accounts receivable from customers

A check that is NSF (non sufficient funds) is a check that

cannot be paid because the account does not contain enough funds

Because cash is assumed to be available for spending, it is typically reported on the balance sheet as a(n) __________ ___________.

current asset

An intentional error by an employee that results in theft is referred to as a ______

fraud

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

fraud

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

fraud

Which of the following will cause differences between the bank statement balance and the accounting balance for cash? - debit card payment by customers - timing differences - errors - checks that are processed the same day as they are written

- timing differences - errors

The two types of control procedures are preventative and _______

detective

The ending balance in cash is reported in which financial statement(s)?

The balance sheet and statement of cash flows

List the steps for a bank reconciliation in the correct order - Adjust the company's cash balance -Update the company's cash account by recording items identified in the previous step - Adjust bank's cash balance

- Adjust bank's cash balance - Adjust the company's cash balance -Update the company's cash account by recording items identified in the previous step

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated? - Accepting credit cards and accepting cash - Depositing checks into the bank and recording receipts in the accounting records - Opening the mail and making a list of checks received - Opening the mail and deposit of checks in the bank

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

Which of the following items are included in cash - balance in checking accounts - notes receivable from customers - accounts receivable from customers - checks from customers - currency and coins

- balance in checking accounts - checks from customers - currency and coins

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? - outstanding checks - charges for NSF checks - service charges - deposits outstanding

- charges for NSF checks - service charges

Which of the following items are included in cash? - checks from customers - notes receivable - accounts receivable - currency and coins - balance in checking accounts

- checks from customers- currency and coins- balance in checking accounts

The two most common sources of occupational fraud are: - personal tax evasion - employee misrepresentation to outside stakeholders - financial statement manipulation - misuse of company resources

- financial statement manipulation - misuse of company resources

internal control consists of plans to (Select all that apply.) - report management errors to the police. - safeguard company assets - provide accurate and reliable accounting information. - report misuse of company assets to investors.

- provide accurate and reliable accounting information. - safeguard company assets

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's: - statement of cash flows - statement of stockholders' equity - income statement - balance sheet

- statement of cash flows - balance sheet

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

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

Which of the following are common controls over cash receipts? - placing one trusted employee in charge of all cash-related activities - having two different employees take custody of the checks and make the deposit - reducing the amount of total sales to customers - opening mail daily and making a detailed list of checks received

-having two different employees take custody of the checks and make the deposit -opening mail daily and making a detailed list of checks received

what would cause a bank statement not to agree with cash balance in the accounting records? - the company wrote checks that have cleared the bank -the bank error in recording a deposit made by the company -the bank paid interest that the company has not recorded -deposits outstanding that have been recorded on the company records, but not the banks -the company made an error in recording a deposit

-the bank error in recording a deposit made by the company -the bank paid interest that the company has not recorded -deposits outstanding that have been recorded on the company records, but not the banks -the company made an error in recording a deposit

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

Smith's operating cash flows in millions were $100, $150, $80 during the past three years; while Jones' operating cash flows in millions were $105, $115, $110 during the same period. From the perspective of operating cash flows, which company would likely be perceived as riskier?

Smith

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

cash

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

decrease

a periodic performance review is an example of a _______ control

defective

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

deposits outstanding

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

designing an internal control system

The amount of cash in the balance sheet reflects the

ending cash on the balance sheet date

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and _________.

errors

The most common source of occupational fraud is:

misuse of company resources

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

petty cash

Two types of control activities are

preventative and detective controls

Separation of duties and E-commerce controls are examples of ______ controls.

preventive

Preparation of a bank ______ helps maintain control of cash accounts

reconciliation

one of the most important internal controls for cash is the bank ___________

reconciliation

Which of the following are detective controls? - reconciliations - audits - proper authorization - performance reviews - physical controls

reconciliations - audits - performance reviews

A petty cash fund is used for

small amounts of cash needed for low-cost items

If a company records a transaction before the bank records the same transaction, this is called a/an _________ difference.

timing

A bank reconciliation compares the company's cash records with the bank statement and discovers differences in those amounts due to

timing differences and errors

What is the primary purpose of a bank reconciliation

to ensure the bank balance per reconciliation is equal to the company balance per reconciliation