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Exam 6: Cash and Internal Controls

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Question 81

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Cash, not including cash equivalents, includes:

A) Postage stamps.
B) Customer checks, cashier checks, and money orders.
C) IOUs.
D) Two-year certificates of deposit.
E) Money market funds.

F) B) and D)
G) B) and C)

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Question 82

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The __________ requires the managers and auditors of companies whose stock is traded on an exchange (called public companies) to document and certify the system of internal controls.

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Question 83

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Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

The following information is available to reconcile Dibble Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $68,356, and the bank statement cash balance for that date is $73,525. a. The bank erroneously cleared a $480 check against the account in April that was not issued by Dibble. The check documentation included with the bank statement indicates the check was actually issued by Flushing Co. b. On April 30, the bank issued a credit memorandum for $53 interest earned on Dibble's account. c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350. d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Dibble, deducted a $30 collection fee, and credited the balance to the company's Cash account. Dibble 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. Dibble's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement. g. Dibble's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks. 1. Prepare the bank reconciliation for this company as of April 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 April 30.

The Cash Over and Short account:

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

A voucher system is a set of procedures and approvals:

Describe the net method of accounting for purchases. Why might companies use the net method?

Describe a bank reconciliation and discuss its purpose.

Separation of duties involves dividing responsibility for a transaction or a series of related transactions between two or more individuals or departments.

Outstanding checks, deposits, and bank service charges are added to the beginning balance of the bank statement to determine the adjusted bank balance.

Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

The following account balances are taken from Ferguson Sports at December 31. $\begin{array} { | l | r | r | } \hline & 2016 & 2015 \\\hline \text { Accounts receivable } & 18,020 & 23,450 \\\hline \text { Net sales } & 163,500 & 157,100 \\\hline\end{array}$ Calculate the number of days' sales uncollected for both years. According to this analysis, is the company's collection of receivables improving? Explain.

The Petty Cash account is a separate bank account used for small amounts.

Because employees know that bonding is an insurance policy against loss from theft, bonding does not generally discourage loss from theft.

It is generally not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

The checklist of steps necessary for approving an invoice for recording and payment, also known as the check authorization, is the

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

The gross method of recording purchases refers to recording: