Chapter 8 Acct T/F
Cash equivalents are short-term investments that will be converted to cash within 120 days.
False
For efficiency of operations and better control over cash, a company should maintain only one bank account
False
If an adjustment for an NSF check is made in a company's bank reconciliation, then the company must have written a bad check during the month.
False
If the balance in Cash Short and Over at the end of a period is a credit, it indicates that cash shortages have exceeded cash overages for the period.
False
In establishing a petty cash fund, a check is written for the amount of the fund and is recorded as a debit to accounts payable and a credit to petty cash
False
In preparing a bank reconciliation, the amount indicated by a debit memorandum for bank service charges is added to the balance per depositor's records
False
In preparing a bank reconciliation, the amount of a check omitted from the journal is added to the balance per depositor's records
False
In preparing a bank reconciliation, the amount of deposits in transit is deducted from the balance per bank statement
False
In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement
False
Money market accounts, commercial paper, and United States Treasury Notes are examples of cash equivalents
False
Most companies who have several bank accounts, petty cash, and cash on hand, would list each separately on the balance sheet
False
Sarbanes-Oxley requires companies to maintain a strong and effective internal control and thus prevent fraud and misleading financial statements
False
Sarbanes-Oxley's purpose is to improve financial reporting
False
Separating the responsibilities for purchasing, receiving, and paying for equipment is an example of the control procedure: separating operations, custody of assets, and accounting
False
The bank often informs the depositor of bank service charges by including a credit memorandum with eh monthly bank statement
False
The bank reconciles its statement to the depositor's records
False
The sum of the money on hand and petty cash receipts in a petty cash fund will always be equal to the balance in the petty cash account
False
When the petty cash fund is replenished, the petty cash account is credited for the total of all expenditures made since the fund was last replenished.
False
A customer's check received in settlement of an account receivable is considered cash
True
A payment system that uses computerized electronic impulses to effect a cash transaction is called electronic funds transfer (EFT)
True
A remittance advice is the notification accompanying the check issued to a creditor that states the specific invoice being paid
True
A voucher is a form on which is recorded pertinent data about a liability and the particulars of its payment
True
A voucher is a written authorization to make a cash payment
True
A voucher system is an example of an internal control procedure over cash payments
True
All bank memorandums reported on the bank reconciliation require entries in the depositor's accounts
True
An example of good internal controls over cash payments is the taking of all cash discounts offered.
True
Bank customers are considered creditors of the bank so the bank shows their accounts with credit balances on the bank's records
True
Businesses who have several bank accounts, petty cash, and cash on hand, would maintain a separate ledger account for each type of cash
True
Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash
True
Expenditures from a petty cash fund are documented by a petty cash receipt
True
For strong internal control system over cash, it is important to have the duties related to cash receipts and cash payments divided among different employees
True
If the balance in Cash Short and Over at the end of a period is a credit, it should be reported as an "other income" item on the income statement
True
In preparing a bank reconciliation, the amount indicated by a credit memorandum for a not receivable collected by the bank is added to the balance per depositor's records
True
In preparing a bank reconciliation, the amount of an error indicating the recording of a check in the journal for an amount larger than the amount of the check is added to the balance per depositor's records
True
Internal control is enhanced by seperating the control of a transaction from the record-keeping function
True
Money orders are considered cash
True
A check outstanding for two consecutive months will appear only on the first month's bank reconciliation
False
A compensating balance occurs when a bank may require a depositor to maintain a maximum cash balance
False
A petty cash fund is used to pay relatively large amounts
False
After a bank reconciliation is completed, adjusting entries are prepared for items in the balance per depositor's records as well as items in the balance per bank statement
False
A backlog in recording transactions is an example of a warning sign from the accounting system
True
A business who requires that all cash payments by made by check, can not use a petty cash system
True
A check for $456 was erroneously charged by the bank as $654. In order for the bank reconciliation to balance, you must add $198 to the bank statement balance
True
The Sarbanes-Oxley's Act requires that financial statements of all public companies report on management's conclusions about the effectiveness of the company's internal control procedures
True
The amount of the "adjusted balance" appearing on the bank reconciliation as of a given date is the amount that is shown on the balance sheet for that date
True
The bank reconciliation is an important part of the system of internal controls
True
The control environment in an internal control structure is the attitude and awareness of internal control by all employees
True
The doomsday ratio includes both cash and cash equivalents in the numerator
True
The main reason that the bank statement cash balance and the depositor's cash balance do not initially balance is due to timing differences
True
When a clerk enters a sale and the customer can see the amount displayed and is given a cash receipt, this is an example of a preventive control
True
When the voucher system is used, the amount due on each voucher represents the credit balance of an account payable if the voucher is in full payment to a creditor
True
