Question 1

A company-issued debit card or credit card is often referred to as a:

Accepted Answer

A)  Budget care.
B)  Allowance card.
C)  Purchase card.D) None of the above
E) B) and C)

Question 2

Which of the following sales would typically be reported as a cash sale?

Accepted Answer

A)  Sale in exchange for office supplies received.
B)  Sale in exchange for equipment received.
C)  Sale on account.
D)  Sale with credit card.E) A) and C)
F) None of the above

Question 3

Which of the following is correct with respect to a bank reconciliation?

Accepted Answer

A)  Subtract interest earned from the bank's balance.
B)  Add service charge to the company's balance.
C)  Subtract NSF checks from the company's balance.D) B) and C)
E) A) and C)

Question 4

A company's lower ratio of cash to noncash assets most likely represents which characteristic of management?

Accepted Answer

A)  Greater willingness to take risk.
B)  Lower ability to find profitable investment projects.
C)  Greater caution to ensure funds are available to pay debt as it becomes due.D) B) and C)
E) None of the above

Question 5

Which of the following is considered cash for financial reporting purposes?

Accepted Answer

A)  Accounts receivable.
B)  Investments with maturity dates greater than three months.
C)  Checks received from customers.D) A) and C)
E) B) and C)

Question 6

Effective internal controls ensure a company's success and survival.Effective internal controls improve the company's likelihood of success and survival,but do not provide a guarantee.

Accepted Answer

A) True 
 B)False

Question 7

Giving only management the right to make purchases over a certain amount is an example of which preventive control?

Accepted Answer

A)  Separation of duties.
B)  Physical controls.
C)  Proper authorization.D) A) and B)
E) B) and C)

Question 8

An example of separation of duties would be not allowing an employee who receives cash to also be responsible for depositing that cash in the bank account.

Accepted Answer

A) True 
 B)False

Question 9

The component of internal control that includes the policies and procedures that help ensure that management's directives are being carried out is:

Accepted Answer

A)  Monitoring.
B)  Information and communication.
C)  Risk assessment.
D)  Control activities.E) None of the above
F) A) and D)

Question 10

A check outstanding will cause the bank's cash balance to be higher than the company's cash balance.

Accepted Answer

A) True 
 B)False

Question 11

When preparing a bank reconciliation,a deposit outstanding would be:

Accepted Answer

A)  Added to the company's cash balance.
B)  Added to the bank's cash balance.
C)  Subtracted from the company's cash balance.D) None of the above
E) A) and B)

Question 12

When accounting for employee purchases,effective internal controls could include which of the following?

Accepted Answer

A)  Credit card receipts are reconciled to credit card statements.
B)  Employees should be required to provide receipts and justification for those receipts on a timely basis.
C)  A separate employee reviews receipts and supporting documents to ensure all expenditures are made appropriately.
D)  All of the other answers represent effective internal controls.E) A) and B)
F) A) and C)

Question 13

Common examples of cash equivalents are money market funds,Treasury bills,and certificates of deposit.

Accepted Answer

A) True 
 B)False

Question 14

Allowing the employee who authorizes purchases to also prepare the check is an example of good internal control.A single employee should not perform both of these tasks.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would NOT represent good controls over cash disbursements?

Accepted Answer

A)  Make all disbursements,other than very small ones,by check,debit card,or credit card.
B)  Require only one signature for checks,especially larger ones.
C)  Authorize all expenditures before purchase and verify the accuracy of the purchase itself.D) All of the above
E) B) and C)

Question 16

The component of internal control that identifies internal and external factors that could prevent a company's objectives from being achieved is:

Accepted Answer

A)  Monitoring.
B)  Information and communication.
C)  Risk assessment.D) None of the above
E) All of the above

Question 17

The act of collusion refers to:

Accepted Answer

A)  Top management and lower-level employees working together to share information necessary for effective internal controls.
B)  Two or more people acting in coordination to circumvent internal controls.
C)  Management working with an auditor to prevent occupational fraud.D) A) and B)
E) All of the above

Question 18

Investing activities include cash investments in long-term assets and investment securities.

Accepted Answer

A) True 
 B)False

Question 19

A customer purchased a $2,000 item at ApplianceWorld,paying with a credit card.ApplianceWorld is charged a 2% fee by the credit card company.When recording this sale,ApplianceWorld would:

Accepted Answer

A)  Debit Accounts Receivable for $2,000.
B)  Credit Sales Revenue for $2,000.
C)  Credit Sales Revenue for $1,960.D) B) and C)
E) A) and C)

Question 20

After preparing the bank reconciliation,an NSF check would result in which of the following when recording the adjustment to the company's cash balance?

Accepted Answer

A)  Debit to Service Fee Expense.
B)  Credit to Accounts Payable.
C)  Credit to Service Revenue.
D)  Debit to Accounts Receivable.E) B) and D)
F) All of the above

Exam 4: Cash and Internal Controls

The component of internal control that includes the policies and procedures that help ensure that management's directives are being carried out is:

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Common examples of cash equivalents are money market funds,Treasury bills,and certificates of deposit.

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When preparing a bank reconciliation,a deposit outstanding would be:

Correct AnswerverifiedShow Answer

The component of internal control that identifies internal and external factors that could prevent a company's objectives from being achieved is:

Correct AnswerverifiedShow Answer

A check outstanding will cause the bank's cash balance to be higher than the company's cash balance.

Correct AnswerverifiedShow Answer

The act of collusion refers to:

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Which of the following is correct with respect to a bank reconciliation?

Correct AnswerverifiedShow Answer

Effective internal controls ensure a company's success and survival.Effective internal controls improve the company's likelihood of success and survival,but do not provide a guarantee.

Correct AnswerverifiedShow Answer

A customer purchased a $2,000 item at ApplianceWorld,paying with a credit card.ApplianceWorld is charged a 2% fee by the credit card company.When recording this sale,ApplianceWorld would:

Correct AnswerverifiedShow Answer

An example of separation of duties would be not allowing an employee who receives cash to also be responsible for depositing that cash in the bank account.

Correct AnswerverifiedShow Answer

When accounting for employee purchases,effective internal controls could include which of the following?

Correct AnswerverifiedShow Answer

Allowing the employee who authorizes purchases to also prepare the check is an example of good internal control.A single employee should not perform both of these tasks.

Correct AnswerverifiedShow Answer

A company's lower ratio of cash to noncash assets most likely represents which characteristic of management?

Correct AnswerverifiedShow Answer

Which of the following sales would typically be reported as a cash sale?

Correct AnswerverifiedShow Answer

Which of the following is considered cash for financial reporting purposes?

Correct AnswerverifiedShow Answer

Giving only management the right to make purchases over a certain amount is an example of which preventive control?

Correct AnswerverifiedShow Answer

Which of the following would NOT represent good controls over cash disbursements?

Correct AnswerverifiedShow Answer

Investing activities include cash investments in long-term assets and investment securities.

Correct AnswerverifiedShow Answer

After preparing the bank reconciliation,an NSF check would result in which of the following when recording the adjustment to the company's cash balance?

Correct AnswerverifiedShow Answer

A company-issued debit card or credit card is often referred to as a:

Correct AnswerverifiedShow Answer

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