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Describe the internal control principle of separating recordkeeping from custody of assets by completing the following sentence. A person who_______________---(identifies/controls/recommends) or has access to an asset must_____________(always/not/) keep that asset's accounting records.

-Controls -Not

Summarize the internal control principle of establishing responsibility by completing the following sentence. Proper internal control means that responsibility for a______________________task/shortage/sale) is clearly__________(posted/established/compensated) and assigned to one person.

-Task _Estabished

Determine which of the statements below accurately describe services provided by a bank. (Check all that apply.)

A bank account is a record set up by a bank for a customer. Each bank deposit is supported by a deposit ticket. To withdraw money from an account, the depositor can use a check.

Given the choices below, choose the examples of internal controls designed to control cash payments (Check all that apply.)

All payments should be made by check. Only authorized individuals should be allowed to sign checks. Use of a voucher system. Use of a petty cash system.

Determine which of the statements below describes a petty cash receipt. (Check all that apply.)

Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt. A petty cash receipt will have a signature line for the person receiving a payment from the fund. A petty cash receipt is sometimes called a petty cash ticket. The petty cashier must present all paid receipts to the company cashier in order to replenish the fund.

Explain how depositors can check for errors by completing the following sentence. Error testing includes (a) comparing deposits on the bank statement with deposits in the___________(accounting/sales/customer) records and (b) comparing____________(outstanding/canceled) checks on the bank statement with___________(checks/deposits) recorded in the accounting records.

Blank 1: accounting Blank 2: canceled Blank 3: checks

Contrast how a depositor's account is classified by a bank compared to how it is classified by the account owner by completing the following sentence. A depositor's account is a(n)_________(liability/asset/expense) on the bank's records, but it is a(n)__________(liability/asset/expense) on the books of the account owner. Because of this, every time the account owner makes a deposit, the bank________(debits/credits) the account owner's account.

Blank 1: liability Blank 2: asset Blank 3: credits

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n)__________(entry/charge/report) explaining any differences between the______________(checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the__________(income/financial/bank) statement.

Blank 1: report Blank 2: checking Blank 3: bank

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $5 in cash and receipts for supplies of $40 and delivery expenses of $49. The fund was initially established with $100. Demonstrate the journal entry to replenish the account and recognize the cash shortage by choosing the correct actions from those given below. (Check all that apply.)

Cash Over and Short is debited for $6. Delivery Expense is debited for $49. Cash is credited for $95. Supplies Expense is debited for $40.

Review the items below and determine which would cause an increase in the monthly bank statement balance.

Cash deposits made by the account owner

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $11 in cash and receipts for supplies of $40 and delivery expenses of $49. The fund was initially established with $100. Demonstrate the journal entry to replenish the account by choosing the correct actions from those below. (Check all that apply.)

Cash is credited for $89. Delivery Expense is debited for $49. Supplies Expense is debited for $40.

At the end of the month, ABC Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $44. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account and recognize its shortage by choosing the correct action from those given below.

Cash is credited for $96.

At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $46. It started out with $100 in the fund at the beginning of the month. Brown Co.'s journal entry to replenish the fund would include which of the following?

Cash is credited for $96.

Jackson Brothers established a petty cash fund of $200 at the beginning of the year, but it decides to reduce the amount in the fund to $130. Demonstrate the correct journal entry to reduce the amount in the account by choosing the correct action from those given below.

Cash is debited for $70 and Petty Cash is credited for $70.

Review the items below and determine which would cause a decrease in the monthly bank statement balance.

Checks written by the account owner

Demonstrate the required adjusting entry needed to record a $1,000 note receivable collected by the bank by choosing the correct entry below.

Debit Cash $1,000 and credit Notes Receivable $1,000.

The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the following entries is correct to record cash sales and the shortage.

Debit Cash $100; debit Cash Over and Short $2; and credit Sales $102.

Determine which of the items below would appear in the Deposits column of a bank statement and would cause an increase in the account's balance. (Check all that apply.)

Deposits made during the month Interest paid by the bank on the bank account balance A note collected by the bank on behalf of the account owner

Identify the principles of internal control by selecting the correct answers below. (Check all that apply.)

Establish responsibilities. Separate recordkeeping from custody of assets. Insure assets. Apply technological controls. Maintain adequate records. Perform regular and independent reviews.

Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period. (Check all that apply.)

Expenses would not be recorded in the period in which they were incurred. The balance sheet would show an overstated cash asset. The income statement would reflect a net income amount that was too high.

Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below. (Check all that apply.)

Handling cash is separate from recordkeeping of cash. Cash receipts are promptly deposited in a bank. Cash payments are made by check.

Which statement below describes the internal control procedure of insuring assets and bonding key employees?

Insuring assets against casualty and bonding employees who handle cash, reduces risk of loss.

Identify the item below that would be added to the book balance.

Interest earned

Identify the bank reconciliation items that would require adjustments to the book balance. (Check all that apply.)

Interest earned Bank charges Collection of note by bank NSF check

Choose the items below that would increase the book balance on a bank reconciliation. (Check all that apply.)

Interest earned on the depositor's account Note collected by the bank for the depositor

Review the following statements and select the ones which accurately describe a Petty Cash fund. Select all answers which apply.

It is an asset reported on the balance sheet. It is established to pay for small payments like low-cost supplies and shipping fees, etc.

Which of the answers below correctly describe the Cash Over and Short account? (Check all that apply.)

It is an income statement account. It records the effects of cash overages and cash shortages. A debit balance reflects an expense.

Identify the statement below that describes what the Days' sales uncollected ratio assesses.

It measures how quickly a company can convert its accounts receivables into cash.

Which statement below explains why liquid assets are needed in a business?

Liquid assets must be available to pay current liabilities.

Which of the following are principles of internal control? (Check all that apply.)

Maintain adequate records. Divide responsibility for related transactions. Perform regular and independent reviews. Establish responsibilities.

Which of the statements below describe the goals and principles of cash management? (Check all that apply.)

Money should be spent only when it is available. Keep a minimum level of cash necessary to operate. Encourage quick collection of receivables. Plan cash receipts to meet cash payments when due.

Determine which of the items on a bank statement and would cause a decrease in the account's balance. (Check all that apply.)

Monthly service fees charged by the bank Checks written by the account owner ATM withdrawals A customer's check that is uncollectible

A person who has access to an asset must _____ access to that asset's accounting records.

NOT HAVE

Identify the item below that would be subtracted from the book balance on a bank reconciliation.

NSF CHECKS

Select the items below that would cause the bank statement balance to differ from the depositor's book balance.

NSF check, Deposit in transit, interest paid by bank

Choose the items below that would be subtracted from the book balance on a bank reconciliation. (Check all that apply.)

NSF customer check Monthly bank service charge Monthly check charges assessed by the bank

Responsibility for a task should be clearly established and assigned to:

ONE person

Choose the statement below which is correct regarding which bank reconciliation items require adjusting journal entries.

Only the items reconciling the book balance require adjustment.

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct.

Only the petty cashier is responsible for paying cash from the fund.

XYZ Co. decided to create a petty cash fund. They estimated that $100 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below.

Petty Cash is debited for $100.

Jackson Brothers decided to create a petty cash fund. They estimated that $200 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below.

Petty Cash is debited for $200; Cash is credited for $200.

Identify which of the items below are goals of good cash management. (Check all that apply.)

Plan cash receipts to meet cash payments when due. Keep a minimum level of cash necessary to operate.

Which of the statements below explains the internal control principle of performing regular and independent reviews?

Regular reviews of internal control systems are needed to ensure that procedures are followed

Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below. (Check all that apply.)

Reliable records are a source of information that managers use to monitor activities. Keeping detailed records makes it unlikely that assets are lost or stolen without detection.

How has the Sarbanes-Oxley Act (SOX) impacted the internal control of companies? (Check all that apply.)

SOX requires that companies have effective internal controls. SOX requires that auditors evaluate internal controls.

Recall the preparation of a bank reconciliation by selecting the correct items below. (Check all that apply.)

Subtract any outstanding checks from the bank balance. Compute the adjusted bank balance. Compute the adjusted book balance. Add deposits in transit to the bank balance.

True or false: An owner of a small business usually knows if the business is receiving the assets and services the company paid for.

TRUE

Which of the statements below describes the internal control principle of applying technological controls?

Technological controls, such as time clocks and cash registers, improve the effectiveness of controls.

Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)

Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry. Technology has encouraged the growth of e-commerce, which means that there is a higher risk of credit card number theft. Technology has reduced the number of processing errors.

A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105. Review the statements below and determine which is correct regarding this discrepancy. (Check all that apply.)

The Cash Over and Short account will be credited for $5. The Sales account will be credited for $100. The Cash account will be debited for $105. The extra $5 collected will be treated as a miscellaneous revenue.

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.

The adjusted bank balance must equal the adjusted cash balance per books.

Identify the examples of good internal control designed to protect over-the-counter cash receipts. (Check all that apply.)

The clerk and the cashier have access to cash, but not to the accounting records. Clerks should be required to give the customer a receipt for each sale.

Determine which of the statements below is correct regarding information reflected on a monthly bank statement.

The information on the bank statement reflects the bank's records of the depositor's account.

There are several reasons why the petty cash fund would experience a shortage or an overage. Determine which of the actions below would result in a shortage or an overage in the petty cash fund.

The petty cashier failed to get a receipt for payment.

Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business. (Check all that apply.)

The petty cashier is responsible for making payments from the petty cash fund. A check is drawn by the company cashier to establish the petty cash fund. The petty cashier is responsible for keeping the cash in the fund safe. The sum of all petty cash receipts plus the remaining cash should equal the total of the fund amount at any given time.

Describe the internal control principle of dividing responsibility for related transactions by selecting the correct statements below. (Check all that apply.)

This principle is often called separation of duties. Examples of transactions with divided responsibility are placing inventory orders and paying vendors. This principle helps to make sure that the work of one individual acts as a check on another individual's work on a related transaction.

Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)

Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation. The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger. We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account for any differences in the two.

What is the purpose of internal controls?

To help managers know if the business is receiving the assets and services it has paid for.

Identify the examples of good internal controls designed to protect cash received in the mail. (Check all that apply.)

Two people are assigned the task of, and are present for, opening the mail. The recordkeeper and the person who reconciles the bank balance do not have access to cash.

Sarbanes-Oxley allows for the following penalties for violators:

Up to 25 years in prison with fines

Identify when the Petty Cash fund is debited or credited by selecting the correct answer below. (Check all that apply.)

When the account is reduced When the account is increased When the account is created

Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)

Withdrawals and other decreases to the account during the period Beginning-of-period balance in the account End-of-period balance in the account Deposits and other increases to the account during the period

The formula to compute days' sales uncollected is:

accounts receivable divided by net sales times 365

An electronic funds transfer involves

an electronic (not paper) transfer of cash.

Regular and independent reviews should be done by _____.

auditors not directly involved in the activities

All of the following items are deductions on a bank statement: (Check all that apply).

bank service fees canceled checks

All of the following describe blockchain:

blockchain makes it more difficult for the ledger to be modified without a detailed record of changes blockchain is continuously and simultaneously updated and verified

A good internal control to protect cash is to make cash payments using

checks

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its___________liabilities

current

Choose the list below that contains only cash or cash equivalents.

customer checks, money orders, certified checks

Brown Co. decides to increase the amount in its petty cash fund from 100 to $150. To show this increase in the petty cash account, you would:

debit petty cash $50

Auditors focus more on testing the ____ of a company's blockchain processes and technology than on verifying the ___ of its output.

effectiveness/accuracy

The electronic transfer of cash from one party to another is called electronic________transfer

funds

Good recordkeeping helps protect assets and helps managers:

monitor company activities

Each of the following are types of technological impacts related to internal control:

new evidence of processing reduced processing errors separation of duties more extensive testing of records

Which of the following are correct regarding why management uses internal controls? (Check all that apply.)

protect assets. uphold company policies. promote efficient operations. ensure reliable accounting.

Bonding employees who handle cash is important because it:

reduces risk of theft

The internal control of____________of duties means that the responsibility for a transaction should be divided between two or more individuals.

separation

An ID scanner is a type of___________control

technological

When cash is received by mail, a list should be prepared with copies sent to all of the following:

the person who opened the mail with the money to the cashier recordkeeper

In addition to the cashier and clerk who have access to the cash a third employee should have access to

the records for cash, but not the actual cash

Cash equivalents include short term investments within

three months of their due date

What is the purpose of internal controls?

to protect assets and ensure reliable accounting

True or false: Bank errors must be accounted for in the bank reconciliation.

true

True or false: The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation; otherwise, the cash account is not reconciled.

true