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Exam 8: Cash and Internal Controls

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Question 81

True/False

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

A) True
B) False

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Question 82

Multiple Choice

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An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n) :

A) Internal audit.
B) Bank reconciliation.
C) Bank audit.
D) Trial reconciliation.
E) Analysis of debits and credits.

F) D) and E)
G) A) and E)

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Question 83

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The entry necessary to establish a petty cash fund should include:

The principles of internal control include: establish responsibilities, maintain adequate records, insure assets, separate recordkeeping from custody of assets, and perform regular and independent reviews.

The following information is available for Johnson Manufacturing Company at June 30: Based on this information, Johnson Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

A voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

Prenumbered printed checks are an example of which internal control principle?

The number of days' sales uncollected is calculated by:

The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

Which of the following events would cause a bank to debit a depositor's account?

A company records purchases using the net method. On February 1, they purchased merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1 journal entry to record this transaction would include a:

Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

The following information is available to reconcile Cloy Company's book balance of cash with its bank statement cash balance as of June 30. The June 30 cash balance according to the accounting records is $58,542, and the bank statement cash balance for that date is $68,047. a. The bank erroneously cleared a $395 check against the account in June that was not issued by Cloy. The check documentation included with the bank statement indicates the check was actually issued by Clare Co. b. On June 30, the bank issued a credit memorandum for $35 interest earned on Cloy's account. c. When the June checks are compared with entries in the accounting records, it is found that Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was erroneously entered in the accounting records as $1,540. d. A credit memorandum indicates that the bank collected $9,000 cash on a note receivable for Cloy, deducted a $30 collection fee, and credited the balance to the company's Cash account. Cloy did not record this transaction before receiving the statement. e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it. f. Cloy's June 30 daily cash receipts of $6,325 were placed in the bank's night depository on that date, but do not appear on the June 30 bank statement. g. Cloy's June 30 cash disbursements journal indicates that Check No. 1737 for $4,830 and Check No. 1740 for $3,280 were both written and entered in the accounting records, but are not among the canceled checks. h. A debit memorandum for $85.00 indicates the bank deducted the annual lock box fee for the company. 1. Prepare the bank reconciliation for this company as of June 30. 2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of June 30.

When evaluating the days' sales uncollected ratio, generally the less time that money is tied up in receivables the better.

What are the steps that must be completed before an invoice approval is complete and a voucher prepared?

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.

Define an internal control system and describe its purpose.

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of _______________________.

A properly designed internal control system is a key part of systems design, analysis, and performance.