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Exam 6: Cash and Internal Controls

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Question 51

True/False

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Assigning purchasing, receiving, and paying for merchandise to one department or individual is a way to streamline a voucher system.

A) True
B) False

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Question 52

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A bank statement provided by the bank includes:

A) A list of outstanding checks.
B) A list of petty cash amounts.
C) The beginning and the ending balance of the depositor's account.
D) A listing of deposits in transit.
E) A reconciliation to the depositor cash account.

F) A) and C)
G) A) and E)

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Question 53

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

An ____________________________ refers to the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

The payee is the person who signs a check, authorizing its payment.

The following information is available for the Topper Company for the month of July. a. On July 31, after all transactions have been recorded, the balance in the company's Cash account has a balance of $15,244. b. The company's bank statement shows a balance on July of $16,450. c. Outstanding checks at July total $2,063. d. A credit memo included with the bank statement indicates that the bank collected $570 on a note receivable for Topper. The $570 includes $550 principle and $20 interest. e. A debit memo included with the bank statement shows a $107 NSF check from a customer, P. Flank. f. A deposit placed in the bank's night depository on July 31 totaling $1,275 did not appear on the bank statement. g. Included with the bank statement was a debit memorandum in the amount of $45 for check printing charges that have not been recorded on the company's books. Prepare the July bank reconciliation for the Topper Company.

A ________________ fund is used to make cash disbursements of small amounts to avoid the time and cost of writing checks.

The petty cash fund should be reimbursed when it is nearing zero and at the end of the accounting period when financial statements are prepared.

A set of procedures and approvals for verifying, approving and recording obligations for eventual cash disbursement, and for issuing checks for payment only of verified, approved, and recorded obligations is referred to as a(n) :

After preparing a bank reconciliation, adjustments must be made for items reconciling the book balance.

Internal control policies and procedures have limitations not including:

A bank does not issue a debit memorandum to notify the depositor of which of the following?

A voucher is an internal document or file:

Electronic funds transfers (EFTs) are decreasingly used by companies due to the inconvenience and high cost.

Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

On a bank statement, deposits are shown as __________________, because the depositor's account is a liability on the bank's records.

Outstanding checks, deposits in transit, deductions for bank fees, additions for interest, and errors are all factors that can cause the bank statement balance for a checking account to be different from the company's checking account balance.

________________ are checks written by the depositor, deducted on the depositor's records, and sent to the payee, but not yet recorded by the bank at the bank statement date.

A company established a petty cash fund in November of the current year and experienced the following transactions affecting the fund during November: $\begin{array}{|l|l|l}\hline\text { Nov. } 1 & \text { Established a } \$ 200 \text { petty cash fund. } \\\hline 5 & \text { Paid } \$ 55 \text { to acquire office supplies. } \\\hline 8 & \begin{array}{l}\text { Reimbur sed the company controller for } \$ 30 \text { spent on beverages for recruits (entertainment } \\\text { Expense) }\end{array} \\\hline 18 & \text { Paid } \$ 45 \text { for postage. } \\\hline 20 & \text { Paid } \$ 25 \text { for C.O.D. charges on merchandise irventory, terms FOB shipping point. } \\\hline 25 & \text { Paid } \$ 40 \text { for janitorial services. } \\\hline28 &\begin{array}{l}\text { When sorting the petty cash receipts to replenish the fund, the custodian noted that there was } \$ 10 \\\text { cash remaining. }\end{array}\\\hline\end{array}$ Prepare the journal entries to establish the fund on November 1 and to reimburse the fund on November 28.

The ________________________________ account is used to record the effects of cash overages and shortages from errors in making change or managing a petty cash fund.