ACC 557 Week 6 Quiz – Strayer NEW
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Chapter 7 and 8
All
possible questions with answers
TRUE-FALSE STATEMENTS
Internal
control is mainly concerned with the amount of authority a supervisor exercises
over a subordinate.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A highly
automated computerized system of accounting eliminates the need for internal
control.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
safeguarding of assets is an objective of a company's system of internal
control.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Management
is responsible for establishing a system of internal control.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Internal
control is most effective when several people are responsible for a given task.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
responsibility for keeping the records for an asset should be separate from the
physical custody of that asset.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Requiring
employees to take vacations is a weakness in the system of internal controls
because it does not promote operational efficiency.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
extent of internal control features adopted by a company must be evaluated in
terms of cost-benefit.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
An
effective system of internal control requires that at least two individuals be
assigned to one cash drawer so that each can serve as check on the other.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Only
large companies need to be concerned with a system of internal control.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
responsibility for ordering, receiving, and paying for merchandise should be
assigned to different individuals.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
In order
to prevent a transaction from being recorded more than once, a company should
maintain only one book of original entry.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Firms
use physical controls primarily to safeguard their assets.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A
segregation of duties among employees eliminates the possibility of collusion.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
For
efficiency of operations and better control over cash, a company should
maintain only one bank account.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Cash
registers are an important internal control device used in controlling
over-the-counter receipts.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Checks
received in the mail should be immediately stamped "NSF" to prevent
unauthorized cashing of the check.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Control
over cash disbursements is improved if major expenditures are paid by check.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
In a
voucher system, vouchers are prepared in the accounts receivable department.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Electronic
funds transfer (EFT) is a disbursement system that uses telephone or computer
to transfer cash from one location to another.
Ans: LO:
4, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA BB: Resource
Management, AICPA FN: None, AICPA PC: Project Management, IMA: Business
Economics
A
voucher system is used by many large companies as a means of controlling cash
receipts.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
petty cash fund eliminates the need for a bank checking account.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Cash
register overages are deposited in the petty cash fund and cash shortages are
made-up from the petty cash fund.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
A deposit
ticket is a negotiable instrument that can be transferred to another party by
endorsement.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: None, AICPA PC: None, IMA: Business Economics
If a company
deposits all its receipts in the bank and pays all its bills by check, then the
monthly bank statement balance will always agree with the company's record of
its checking account balance.
Ans: LO:
6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics
Checks
from customers who pay their accounts promptly are called outstanding checks.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: None, AICPA PC: Communications, IMA: Business Economics
All
reconciling items in determining the adjusted cash balance per books require
the depositor to make adjusting journal entries to the Cash account.
Ans: LO:
7, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
A bank
reconciliation is generally prepared by the bank and sent to the depositor
along with cancelled checks.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics
Cash
equivalents are highly liquid investments that can be converted into a specific
amount of cash.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics
Cash
which is restricted for a specific use should be separately reported.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A
company always reports restricted cash as a noncurrent asset.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A
company with a net negative balance in its bank account should report this
balance among current liabilities.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Companies
report cash in both the balance sheet and the statement of cash flows.
Ans: LO:
8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Internal
control consists of the plan of organization and all of the related methods and
measures adopted within a business to (a) safeguard its assets, and (b) enhance
the accuracy and reliability of its accounting records.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
In
general, documents should be prenumbered and all documents should be accounted
for.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: Project Management, IMA:
Internal Controls
Collusion
may result when one individual circumvents prescribed controls and may
significantly impair the effectiveness of a system.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Personnel
who handle cash receipts should have the option of taking a vacation or not.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
duties of approving an item for payment and paying the item should be done by
different departments or individuals.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
custodian of the petty cash fund has the responsibility of recording a journal
entry every time cash is used from the fund.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Internal Controls
A debit
memorandum could show the collection of a note receivable by the bank.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics
To
obtain maximum benefit from a bank reconciliation, the reconciliation should be
prepared by an employee who has no other responsibilities pertaining to cash.
Ans: LO:
7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
MULTIPLE
CHOICE QUESTIONS
Which
one of the following is not an objective of a system of internal controls?
Safeguard
company assets
Overstate
liabilities in order to be conservative
Enhance
the accuracy and reliability of accounting records
Reduce
the risks of errors
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Internal
controls are concerned with
only
manual systems of accounting.
the
extent of government regulations.
safeguarding
assets.
preparing
income tax returns.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
All of
the following requirements about internal controls were enacted under the
Sarbanes- Oxley Act except;
independent
outside auditors must attest to the level of internal control.
companies
must develop sound internal controls over financial reporting.
companies
must continually assess the functionality of internal controls.
independent
outside auditors must eliminate redundant internal controls.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Internal Controls
LO: 1
Internal
control is defined, in part, as a plan that safeguards
all
balance sheet accounts.
assets.
liabilities.
capital
stock.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Which of
the following is not one of the main factors that contribute to fraudulent
activity?
Opportunity
Incompatible
duties
Financial
pressure
Rationalization
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Global Business
The most
important element of the fraud triangle is
financial
pressure.
incompatible
duties.
opportunity.
rationalization.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Global Business
LO: 1
48. Internal controls are not designed to safeguard assets from
natural
disasters.
employee
theft.
robbery.
unauthorized
use.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Having
one person post entries to accounts receivable subsidiary ledger and a
different person post to the Accounts Receivable Control account in the general
ledger is an example of
inadequate
internal control.
duplication
of effort.
external
verification.
segregation
of duties.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Having
one person responsible for the related activities of ordering merchandise,
receiving goods, and paying for them
increases
the potential for errors and fraud.
decreases
the potential for errors and fraud.
is an
example of good internal control.
is a
good example of safeguarding the company's assets.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management,
AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
custodian of a company asset should
have
access to the accounting records for that asset.
be
someone outside the company.
not have
access to the accounting records for that asset.
be an
accountant.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Internal
auditors
are
hired by CPA firms to audit business firms.
are
employees of the IRS who evaluate the internal controls of companies filing tax
returns.
evaluate
the system of internal controls for the companies that employ them.
cannot
evaluate the system of internal controls of the company that employs them
because they are not independent.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
When two
or more people get together for the purpose of circumventing prescribed
controls, it is called
a fraud
committee.
collusion.
a
division of duties.
bonding
of employees.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
From an
internal control standpoint, the asset most susceptible to improper diversion
and use is
prepaid
insurance.
cash.
buildings.
land.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
principle of establishing responsibility does not include
one
person being responsible for one task.
authorization
of transactions.
independent
internal verification.
approval
of transactions.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
control principle related to not having the same person authorize and pay for
goods is known as
establishment
of responsibility.
independent
internal verification.
segregation
of duties.
rotation
of duties.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Two
individuals at a retail store work the same cash register. You evaluate this
situation as
a
violation of establishment of responsibility.
a
violation of segregation of duties.
supporting
the establishment of responsibility.
supporting
internal independent verification.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
An
accounts payable clerk also has access to the approved supplier master file for
purchases. The control principle of
establishment
of responsibility is violated.
independent
internal verification is violated.
documentation
procedures is violated.
segregation
of duties is violated.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Controls
that enhance the accuracy and reliability of the accounting records are
automated
controls.
external
controls.
physical
controls.
mechanical
and electronic controls.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Related
selling activities do not include
ordering
the merchandise.
making a
sale.
shipping
the goods.
billing
the customer.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
independent internal verification principle involves each of the following
except the ______________ of data prepared by other employees.
comparison
reconciliation
review
segregation
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Related
buying activities include
ordering,
receiving, paying.
ordering,
selling, paying.
ordering,
shipping, billing.
selling,
shipping, paying.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Jolene
is warehouse custodian and also maintains the accounting record of the
inventory held at the warehouse. An assessment of this situation indicates
documentation
procedures are violated.
independent
internal verification is violated.
segregation
of duties is violated.
establishment
of responsibility is violated.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Physical
controls to safeguard assets do not include
cashier
department supervisors.
vaults.
employee
identification badges.
security
guards.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
In large
companies, the independent internal verification procedure is often assigned to
computer
operators.
management.
internal
auditors.
outside
CPAs.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Maximum
benefit from independent internal verification is obtained when
it is
made on a pre-announced basis.
it is
done by the employee possessing custody of the asset.
discrepancies
are reported to management.
it is
done at the time of the audit.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
If
employees are bonded
it means
that they are not allowed to handle cash.
they
have worked for the company for at least 10 years.
they
have been insured against misappropriation of assets.
it is
impossible for them to steal from the company.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Rebekah
Grace has worked for Specoly Inc., for 20 years without taking a vacation. An
internal control feature that would address this situation would be
other
controls.
establishment
of responsibility.
physical
controls.
documentation
procedures.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A system
of internal control
is
infallible.
can be
rendered ineffective by employee collusion.
invariably
will have costs exceeding benefits.
is
premised on the concept of absolute assurance.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
For
accounting purposes, postdated checks (checks payable in the future) are
considered to be
money
orders.
cash.
petty
cash.
accounts
receivable.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
Postage
stamps on hand are considered to be
cash.
petty
cash.
cash
equivalents.
a
prepaid expense.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Which
one of the following items would not be considered cash?
Coins
Money
orders
Currency
Postdated
checks
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Checks
received through the mail should
immediately
be endorsed "For Deposit Only."
be sent
to the accounts receivable subsidiary ledger clerk for immediate posting to the
customer's account.
be
cashed at the bank as soon as possible.
be
"rung up" on a cash register immediately.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics
Proper
control for over-the-counter cash receipts includes
a cash
register with totals visible to the customer.
using
electronic cash registers with no tapes.
cash
count sheets requiring only the supervisor's signature.
cash
count sheets requiring only the cashier's signature.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A
company stamps checks received in the mail with the words "For Deposit
Only". This endorsement is called a(n)
blank
endorsement.
rubber
stamp.
restrictive
endorsement.
operational
endorsement.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management,
AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The
daily cash count of cash register receipts made by department supervisors is an
example of
other
controls.
independent
internal verification.
establishment
of responsibility.
segregation
of duties.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The use
of remittance advices for mail receipts is an example of
documentation
procedures.
other
controls.
physical
controls.
independent
internal verification.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector
Perspective, AICPA FN: None, AICPA PC: None, IMA: Business Economics
Allowing
only designated personnel to handle cash receipts is an example of
establishment
of responsibility.
segregation
of duties.
documentation
procedures.
independent
internal verification.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Control
over cash disbursements is generally more effective when
all
bills are paid in cash.
disbursements
are made by the accounts payable subsidiary clerk.
payments
are made by check.
all
purchases are made on credit.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Reconciling
the bank statement monthly is an example of
segregation
of duties.
independent
internal verification.
establishment
of responsibility.
documentation
procedures.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
An
exception to disbursements being made by check is acceptable when cash is paid
to an
owner.
to
employees as wages.
from
petty cash.
to
employees as loans.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Allowing
only the treasurer to sign checks is an example of
documentation
procedures.
segregation
of duties.
other
controls.
establishment
of responsibility.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Blank
checks
should
be safeguarded.
should
be pre-signed.
do not
need to be safeguarded since they must be signed to be valid.
should
not be prenumbered.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
An
employee authorized to sign checks should not record
owner
cash contributions.
mail
receipts.
cash
disbursement transactions.
sales
transactions.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A
voucher system is a series of prescribed control procedures
to check
the credit worthiness of customers.
designed
to assure that disbursements by check are proper.
which
eliminates the need for a sales journal.
specifically
designed for small firms who may not have checking accounts.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Under a
voucher system, a prenumbered voucher is prepared for every
cash
receipt, regardless of source.
transaction
entered into by the business.
expenditure
except those made from petty cash.
journal
entry.
Ans: LO:
4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A credit
balance in Cash Over and Short is reported as a(n)
asset.
liability.
miscellaneous
expense.
miscellaneous
revenue.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
entry to replenish a petty cash fund includes a credit to
Petty
Cash.
Cash.
Freight-In.
Postage
Expense.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
A debit
balance in Cash Over and Short is reported as a
contra
asset.
miscellaneous
asset.
miscellaneous
expense.
miscellaneous
revenue.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
A petty
cash fund of $100 is replenished when the fund contains $4 in cash and receipts
for $94. The entry to replenish the fund would
credit
Cash Over and Short for $2.
credit
Miscellaneous Revenue for $2.
debit
Cash Over and Short for $2.
debit
Miscellaneous Expense for $2.
Ans: LO:
5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
A petty
cash fund is generally established in order to
pay for
all merchandise purchased on account.
pay
employees’ wages.
make
loans internally to employees.
pay relatively
small expenditures.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A petty
cash fund should be replenished
every
day.
at the
end of every accounting period.
once a
year.
as soon
as an expense is paid from the fund.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
A petty cash
fund should not be used for
postage
due.
loans to
the petty cash custodian.
taxi
fares.
customer
lunches.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
The size
of the petty cash fund is dependent on
the
wishes of the custodian of the fund.
anticipated
disbursements for the year.
anticipated
disbursements for a three- to four-week period.
the size
of the regular cash account.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource
Management, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Internal Controls
Replenishing
the petty cash fund requires
a debit
to Cash.
a credit
to Petty Cash.
a debit
to various expense accounts.
no
accounting entry.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Entries
are made to the Petty Cash account when
establishing
the fund.
making
payments out of the fund.
recording
shortages in the fund.
replenishing
the fund.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory
Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA
A $100
petty cash fund has cash of $13 and receipts of $84. The journal entry to
replenish the account would include a credit to
Cash for
$87.
Petty
Cash for $87.
Cash
Over and Short for $3.
Cash for
$84.
Ans: LO:
5, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB:
Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving,
IMA: FSA
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