ch. 4 fin accounting

Internal control consists of plans to

1) safeguard company assets 2) improve the accuracy and reliability of accounting information - purpose to prevent the misuse of company funds by employees and fraudulent or errant financial reporting. Strong internal control systems allow greater reliance by investors on reported financial statements.

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

1. reconcile bank cash balance - determining which cash transactions have been recorded by the company but not yet the bank - Adjust the bank's cash balance for items not in the bank statement 2. reconcile company cash balance - reconcile the companies cash balance per the general ledger by determining which cash transactions have been recorded by the bank but not yet by the company - Record items that reconcile the company's cash balance 3. update the companies cash account by recording items identified in companies cash balance - Adjust the company's cash balance for items not in company records

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

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

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

Sarbanes-Oxley Act - all companies are required to file financial statements with the SEC and represent one of the greatest reforms in business practices in U.S history. This act established a variety of guidelines related to auditor- client relations and internal control procedures.

Which of the following items are not included in cash?

accounts receivable from customers

The asset that is most susceptible to employee fraud is

cash is most susceptible to employee fraud

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?

collection of funds by the bank

The Sarbanes-Oxley Act applies to

companies that are required to file with the SEC.

NSF check

company deposit a customer check but the customer did not have enough to cover the check

what is included in cash

currency, coins, cash in savings account, balance in checking account

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

deposit outstanding

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

fraud

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

internal controls

bank reconciliation

matches the balance of cash in the bank account with the balance of cash in the companies own records

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

occupational fraud

timing difference

occurs when the company records transactions either before or after the bank records the same transactions

Which of the following are common controls over cash receipts?

open mail each day and make a list of cash and checks received, including the amount and payers name designate the employee to deposit cash and checks into the companies bank account each day, different from the person who receives cash and checks have another employee record cash receipts in the accounting records as soon as possible. Verify cash receipts by comparing the bank deposit slip with the accounting records accept credit or debit cards, to limit the amount of cash employees handle

A small amount of cash on hand to pay for minor purchases is commonly referred to as a ------ ------ fund.

petty cash fund

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

reconciliation

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance?

unrecorded balance, NSF checks , bank service fees , company errors