Chapter 4 Quiz

When employee expenditures with company-issued credit cards are recorded:

Accounts Payable is credited.

Which of the following generally would be considered good internal control of cash disbursements?

Set maximum purchase limits on debit cards and credit cards.

When preparing a bank reconciliation, outstanding checks would be:

Subtracted from the bank's cash balance.

When preparing a bank reconciliation, nonsufficient funds (NSF) checks would be:

Subtracted from the company's cash balance.

Who is ultimately responsible for the establishment and success of a company's internal control system?

The company's top executives.

A company's own cash records show a balance of $3,200. After examining the bank statement, the following information is revealed: Bank's balance for cash $ 4,000 Deposits outstanding $ 2,300 NSF check $ 600 Checks outstanding $ 1,800 Note collected by the bank $ 2,000 Service fee charged by the bank $ 100 After reconciliation, the correct balance of cash is:

$4,500.

At the end of the previous year, a company's balance sheet reports cash of $30,000. For the current year, the company's statement of cash flows reports operating cash inflows of $90,000; investing outflows of $110,000; and financing inflows of $40,000. What amount of cash will be reported in the current year's balance sheet?

$50,000.

Employee purchases of supplies with a company-issued credit card is typically recorded with a credit to

Accounts Payable.

Fraudulent reporting by management could include

All of the answer choices are correct.

The Sarbanes-Oxley Act (SOX) mandates which of the following?

All of the answer choices are correct.

A company's ratio of cash to noncash assets provides some indication of the company's ability to:

All of the choices are correct.

Which of the following is considered cash for financial reporting purposes?

All of the choices are correct.

Which of the following could cause a company to have a high ratio of cash to noncash assets?

All of these factors could contribute to a high ratio of cash to noncash assets.

Which of the following is considered cash for financial reporting purposes?

Amounts held in checking accounts.

Managers should act:

As stewards of the company's assets.

Which of the following is considered cash for financial reporting purposes?

Balances in savings accounts.

A company's petty cash refers to:

Cash on hand to pay for minor purchases.

Operating cash flows include which of the following?

Cash paid for supplies.

Financing cash flows include which of the following?

Cash received from the issuance of common stock.

Investing cash flows include which of the following?

Cash received from the sale of a used company truck.

Which of the following adjusts the bank's balance of cash in a bank reconciliation?

Checks outstanding.

Which of the following is considered cash for financial reporting purposes?

Checks received from customers.

Sarbanes-Oxley Act (SOX) was passed in response to:

Corporate scandals involving unethical behavior of top executives.

A company's own cash records show a balance of $3,200. After examining the bank statement, the following information is revealed: Bank's balance for cash $ 4,000 Deposits outstanding $ 2,300 NSF check $ 600 Checks outstanding $ 1,800 Note collected by the bank $ 2,000 Service fee charged by the bank $ 100 The entry to update the company's cash balance after the bank reconciliation is prepared would include a:

Debit to Accounts Receivable.

Which of the following adjusts the bank's balance of cash in a bank reconciliation?

Deposits outstanding.

Section 404 of the Sarbanes-Oxley Act requires companies to:

Document and assess internal controls.

What is the concept behind separation of duties in establishing internal control?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

Which of the following generally would be considered a good internal control over cash payments?

Ensure checks are serially numbered and signed only by authorized employees.

The Sarbanes-Oxley Act of 2002 applies to all companies that:

File reports with the Securities and Exchange Commission.

Which of the following adjusts the company's balance of cash in a bank reconciliation?

Interest earned.

Which of the following adjusts the company's balance of cash in a bank reconciliation?

Interest on bank deposit.

Which of the following is an example of detective controls?

Management periodically determines whether the amount of physical assets agree with the accounting records.

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress:

Passed the Sarbanes-Oxley Act.

Operating cash flows would include which of the following?

Payment for employee salaries.

Investing cash flows would include which of the following?

Payment for land.

Operating cash flows would include which of the following?

Payment for prepaid insurance.

Corporate executive accountability under the Sarbanes-Oxley Act requires corporate executives to:

Personally certify the company's financial statements.

The purpose of a petty cash fund is to

Provide cash on hand for minor expenditures.

Financing cash flows would include which of the following?

Repayment of long-term borrowing to the bank.

Which of the following generally would not be considered good internal control of cash receipts?

Requiring the employee receiving the cash from the customer to also deposit the cash into the company's bank account.

At any given time, the amount of cash in the petty cash fund should equal:

The established balance of the fund less all vouchers written during the accounting period.

Consistent with the COSO framework, an effective internal control system includes the control environment. The control environment refers to:

The ethical tone set by top management.

Effective internal control over cash includes the requirement that:

The person who makes deposits should NOT record the deposits.

The primary reason the balance of cash in the company's records will differ from the balance of cash in the bank's records includes:

Timing differences of recording cash transactions by the company and by the bank.

What is a direct purpose of internal controls?

To improve the accuracy and reliability of accounting information.