chapter 4
List the steps for a bank reconciliation in the correct order.
1. adjust bank's cash balance 2.adjust company's cash balance 3.update company's cash account by recording items identified in the previous step
Which of the following steps are necessary to reconcile the bank balance and the cash account balance.
Adjust bank's cash balance, Adjust the company's cash balance, Record items that reconcile the company's cash balance
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
Which of the following items are included in cash?
Balance in checking accounts, Checks from customers, Currency and coins
The framework for designing an internal control system is provided by the ___
Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
Which of the following items will require a journal entry following a bank reconciliation?
Notes collected by the bank NSF checks
Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?
Opening the mail and deposit of checks in the bank, Depositing checks into the bank and recording receipts in the accounting records
Which of the following are preventive controls?
Physical controls Separation of duties
When adjusting the company's cash account balance in a bank reconciliation, which items must decrease the company's cash account balance?
Service charges, Charges for NSF check
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 OR balance sheet
What would cause a bank statement not to agree with the cash balance in the accounting records?
The bank paid interest that the company has not recorded, Deposits outstanding that have been recorded on the company's records, but not on the bank's, The company made an error in recording a deposit, The bank made an error in recording a deposit made by the company.
What is the primary purpose of a bank reconciliation?
To ensure the bank balance per reconciliation is equal to the company balance per reconciliation
Which of the following items are not included in cash?
accounts receivable from customers
The ending balance in cash is reported in which financial statement(s)?
balance sheet and statement of cash flows
A check that is NSF (nonsufficient funds) is a check that
cannot be paid because the account does not contain enough funds.
The asset that is most easily stolen and susceptible to fraud is ___
cash
The asset that is most susceptible to employee fraud is ___
cash
A bank reconciliation reconciles the bank statement with the company's
cash account in the balance sheet
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
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 two types of control procedures are preventive and
detective
Which of the following will cause differences between the bank statement balance and the accounting balance for cash?
errors and timing differences
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
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
A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as ___
internal controls
A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as ____
internal controls
The acronym NSF stands for
nonsufficient funds
Which of the following are common controls over cash receipts?
opening mail daily and making a detailed list of checks received, having two different employees take custody of the checks and make the deposit
Which of the following are common controls over cash receipts? (Select all that apply.)
opening mail daily and making a detailed list of checks received, having two different employees take custody of the checks and make the deposit
A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n) ___ ___ fund. (Enter one word per blank.)
petty cash fund
Separation of duties and E-commerce controls are examples of ______ controls.
preventative
Two type of control activities are ___
preventative and detective
Internal control consists of plans to
provide accurate and reliable accounting information
Internal control consists of plans to ___
provide accurate and reliable accounting information, safeguard company assets.
One of the most important internal controls for cash is the bank___
reconciliation
Preparation of a bank ___ helps maintain control of cash accounts.
reconciliation
A petty cash fund is used for
small amounts of cash needed for low-cost items
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
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
If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference.
timing
