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Exam 6: Accounting for Cash and Internal Controls

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Question 31

True/False

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If the Cash Over and Short account has a debit balance at the end of the period, the amount is reported as miscellaneous revenue.

A) True
B) False

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Question 32

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A company's internal control system:

A) Eliminates the risk of loss.
B) Monitors and controls business activities.
C) Eliminates human error.
D) Eliminates the need for audits.
E) Is not necessary in large companies.

F) C) and E)
G) C) and D)

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Question 33

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The purposes and principles of internal control are fundamentally the same across the globe. However, cultural differences sometimes suggest different emphasis on the mix of control procedures.

For which item does a bank NOT issue a debit memorandum?

Assume that a buyer receives a shipment of MODEL SD010 with an invoice amount of $780, although $870 worth of goods were received. The purchase order was for $870. Since the difference was in the buyer's favor, the buyer's purchasing department should authorize payment of $780.

Two important limitations of internal control systems are (1) human error or human fraud and (2) cost-benefit.

Discuss how the principles of internal control apply to cash receipts.

Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much is in petty cash before the reimbursement?

What is the purpose of the petty cash account?

All disbursements from petty cash should be documented by a petty cash receipt.

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 2889 for December's utilities was correctly written and drawn for $790 but was erroneously entered in the accounting records as $970. The journal entry to adjust the books for the bank reconciliation would include which of the following for this situation?

The ________________ ratio reflects the liquidity of a company's accounts receivable.

Which of the following are risks of e-commerce?

A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

A company established a petty cash fund in February of the current year and experienced the following transactions affecting the fund during February: Prepare the journal entry to reimburse the fund and to reduce its amount on February 28.

Internal control in technologically advanced accounting systems depends more on the design and operation of the information system and less on the analysis of its resulting documents.

The payee is the person who signs a check and authorizes payment.

The internal document that is prepared by a department manager to inform the purchasing department of its needs is called the ________________________.

In year 1 a company had net sales of $50,000 and ending accounts receivable of $2,000. In year 2 this company had net sales of $80,000 and ending accounts receivable of $4,000. Use days' sales uncollected to determine which of the following statements is true:.

________________________ are checks written (or drawn) by the depositor, deducted on the depositor's records and sent to the payee, but not yet recorded by the bank for payment at the bank statement date.