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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

How has the Sarbanes-Oxley Act (SOX) impacted the Internal control of companies? (Check all that apply.)
 
SOX requires that each company's annual report contain an internal control report.
SOX requires that managers document all internal control processes that can impact financial reporting.
SOX requires that companies must assess the effectiveness of their internal controls.
   
Which of the following are correct regarding why management uses internal controls?
 
Protect assets
Ensure reliable accounting
Uphold company policies
Promote efficient operations
   
Identify the principles of internal control by selecting the correct answers below.
 
Apply technological controls
Perform regular and independent reviews
Separate recordkeeping from custody of assets
Insure assets
Establish responsibilities
Maintain adequate records
   
Summarize the internal control principle of establishing responsibility by completing the following sentence.
Proper internal control means that responsibility for a ____________ (task/shortage/sale) is clearly _________
(posted/established/compensated) and assigned to one person
 
Task; Established
   
Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below
 
Keeping detailed records makes it unlikely that assets are lost or stolen without detection
Reliable records are a source of information that managers use to monitor activities
   
Bonding employees who handle cash is important because it:
 
discourages employee theft
  There are several reasons why the petty cash fund would experience a shortage or an overage .
Determine which of the actions below would result in a shortage or an overage in the petty cash fund.
(Check all that apply.)
 
A person receiving a disbursement from the fund failed to return change from a transaction
The petty cashier failed to get a receipt for payment.
The petty cashier overpaid for the amount due.
   
What is the purpose of internal controls?
 
Companies create internal controls to protect assets and ensure reliable accounting
   
Which of the following are principles of internal control?
 
Divide responsibility for related transactions
Perform regular and independent reviews
Maintain adequate records
Establish responsibilities
   
Describe the internal control principle of separating recordkeeping from custody of assets by completing the
following sentence. A person who ____________ (identifies/controls/recommends) or has access to an asset
must __________ (always/not/) keep that asset's accounting records.
 
Controls; Not
   
Define the Discounts Lost account by selecting the statements below that correctly describe this account
(Check all that apply.)
 
It is debited when a discount is not taken and when using the net method of recording purchases.
It is an expense account.
It is reported on the income statement.
   
Responsibility for a task should be clearly established and assigned to:
 
One person
   
Summarize the information included on the inside and the outside of a voucher by selecting the correct Items below.
(Check all that apply.)
 
Date of the invoice
Terms of the purchase
The name of the account to debit for the payment
The name of the vendor to whom the money is owed.
   
The triple threat of fraud involves:
 
Rationalization
Pressure
Opportunity
   
Identify the items below which are correct statements about the similarities and differences between
IFRS and U.S. GAAP in regards to internal controls and in the accounting and reporting of cash. (Check all that apply.)
 
Accounting definitions for cash are similar for U.S. GAAP and IFRS.
U.S.. GAAP and IFRS strongly support procedures aimed at controlling cash receipts and disbursements.
Both U.S. GAAP and IFRS support enhanced internal controls.
   
Determine which of the statements below accurately describe services provided by a bank.
(Check all that apply.}
 
To withdraw money from an account, the depositor can use a check.
Each bank deposit is supported by a deposit ticket
A bank account is a record set up by a bank for a customer.
   
Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below.
 
Cash payments are made by check.
Cash receipts are promptly deposited in a bank.
Handling cash is separate from recordkeeping of cash.
   
Jackson Brothers established a petty cash fund of $200 at the beginning of the year, but it decides to reduce the
amount in the fund to $130. Demonstrate the correct journal entry to reduce the amount in the account by
choosing the correct action from those given below
 
Cash is debited for $70 and Petty Cash is credited for $70
   
The adjusted book balance and the adjusted bank balance must equal each other on a bank reconciliation;
otherwise, the cash account is not reconciled.
 
True
   
Which of the statements below describe the goals and principles of cash management?
 
Encourage quick collection of receivables.
Money should be spent only when it is available.
Plan cash receipts to meet cash payments when due.
Keep a minimum level of cash necessary to operate.
   
Review the statements below to determine the correct definition of a credit memorandum.
 
The bank notifies the depositor of each increase to the account with a credit memorandum
   
At the end of the month, ABC Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery
expenses of $44. It started out with $100 in the fund at the beginning of the month.
Demonstrate the journal entry to replenish the account and recognize its shortage by choosing the correct action from those given below.
 
Cash is credited for $96
   
The following annual account balances are taken from ABC Co at year end.
 
2015                      2014
Accounts Receivable $  5, 500   $             4,000
Net Sales                             $             58,000 $              55 ,000
Days sales uncollected ? days                   ? days
 
34.6 days
   
Review the following statements regarding a petty cash fund used in a business.
 
Only the petty cashier is responsible for paying cash from the fund.
   
True or False: A receiving report is a document that describes when goods have been received. It contains information
about the quantity received as well as its condition and whether it agrees with the purchase order.
 
True
   
Identify the statement below that describes what the Days' sales uncollected ratio assesses.
 
It measures how quickly a company can convert its accounts receivables into cash.
   
BC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10, n/30 and paid for the
merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both
the gross method and the net method by matching the action on the left with the method on the right.
(Assume a perpetual inventory system.)
 
Cash would be credited for $980 on August 14.                                                <>           Both methods
Merchandise Inventory would be debited for $980 on August 5.                                 <>          Net method
Merchandise Inventory would be credited for $20 on August 14.                                <>          Gross method
Discounts Lost would be debited for $20 on August 14.                                  <>           Neither method
   
Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation
 
The adjusted bank balance must equal the adjusted cash balance per books.
   
Describe the purpose of a purchase requisition by selecting the correct answer below
 
Purchase requisitions are used for control purposes.
Purchase requisitions are used to inform the purchasing department of its needs.
Managers are not allowed to place orders directly with vendors; instead, they fill out a purchase requisition.
   
A bank reconciliation is a(n) _________ (entry/charge/report) explaining any differences between the __________
(checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the
 _________ (income/financial/bank) statement.
 
Report; Checking; Bank
   
Explain how depositors can check for errors by completing the following sentence.
 
Error testing includes (a) comparing deposits on the bank statement with deposits in the accounting
(accounting/sales/customer) records and (b) comparing canceled (outstanding/canceled) checks on the bank
statement with checks (checks/deposits) recorded in the accounting records.
   
Identify which of the items below are goals of good cash management.
 
Keep a minimum level of cash necessary to operate.
Plan cash receipts to meet cash payments when due.
   
Identify the examples of good internal control designed to protect over-the-counter cash receipts. (Check all that apply.)
 
The clerk and the cashier have access to cash, but not to the accounting records.
Clerks should be required to give the customer a receipt for each sale
Clerks should be required to enter each sale before wrapping merchandise
   
A depositor's account is a(n) __________ (liability/asset/expense) on the bank's records, but it is a(n) ________
(liability/asset/expense) on the books of the account owner. Because of this, every time the account owner makes
a deposit, the bank _________ (debits/credits) the account owner's account.
 
Liability; Asset; Credits
   
Describe what an invoice approval is by selecting the correct answer below
 
An invoice approval is completed by the accounting department to approve an invoice for payment.
   
Select the items below that would cause the bank statement balance to differ from the depositor's book balance.
 
NSF check, Deposit in transit, interest paid by bank
   
Describe the internal control principle of separating record keeping from custody of assets by comp leting
the following sentence. A person who __________ (identifies/controls/recommends) or has access to an asset must not
(always/not/) keep that asset's accounting records.
 
Controls
   
Identify the examples of good internal controls designed to protect cash received in the mail.
 
The recordkeeper and the person who reconciles the bank balance do not have access to cash.
Two people are assigned the task of, and are present for, opening the mail.
   
Determine which of the items below would appear in the Deposits and Credits column of a bank statement
and would cause an increase in the account's balance.
 
Interest paid by the bank on the bank account balance
Deposits made during the month
A note collected by the bank on behalf of the account owner
   
An invoice can be described as an itemized statement of goods prepared by the _________ (buyer/customer/vendor)
listing the customer's name, items sold, sales prices and terms of sale.
 
vendor
   
Determine the statements below that are true regarding why a bank reconciliation is used.
 
We must reconcile the balance of the bank's records and the Cash account in the general ledger and explain or account
for any differences in the two.
Timing differences between the bank statement and the depositor's records are reflected in the bank reconciliation.
The bank reconciliation is useful in proving the accuracy of the Cash account in the general ledger.
   
Define what a voucher is by completing the following sentence
A voucher is an _______ (internal/external) document (or file) used to accumulate information to _______ (reduce/control)
cash disbursements and to ensure that a transaction is properly recorded.
 
Internal; control
   
Describe what a voucher system is by selecting the correct statement below.
 
A voucher system is a set of procedures and approvals designed to control cash disbursements
   
Review the statements below to determine the correct definition of a debit memorandum.
 
The bank notifies the depositor of each deduction to the account with a debit memorandum.
   
Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each to its definition on the right.
Outstanding Check
Deposit in Transit
NSF Check
Bank Charges
 
Outstanding check:         A check written by the depositor that has not yet been received by the bank for payment
Deposit in transit:            Deposit made and recorded by the depositor, but not yet recorded on the bank statement
NSF check:                          A check written by a customer who does not have enough money in his account to cover the check
Bank charges:                    Service fees charged by the bank
   
Identify the item below that would be added to the book balance.
 
Interest earned
   
At the end of the month, ABC Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $44.
It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account and recognize
its shortage by choosing the correct action from those given below
 
Cash is credited for $96.
   
In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence
1.            Enter the bank statement balance then add any deposits in transit and subtract any outstanding checks
2.            Compute the adjusted bank balance
3.            Enter the company's book balance
4.            Add any unrecorded cash receipts, interest earned, and errors understating the book balance
5.            Subtract any unrecorded bank fees, NSF checks, and errors overstating the book balance
6.            Compute the adjusted book balance and compare it to the adjusted bank balance to verify equality
   
Review the items below and determine which would cause an increase in the monthly bank statement balance.
 
Cash deposits made by the account owner
   
Choose the items below that would be added to the book balance on a bank reconciliation.
 
Note collected by the bank for the depositor
Interest earned on the depositor's account
   
Recall the preparation of a bank reconciliation by selecting the correct items below.
 
Add deposits in transit to the balance per bank.
Compute the adjusted bank balance.
Compute the adjusted book balance.
Subtract any outstanding checks from the balance per bank.
   
Choose the items below that would be subtracted from the book balance on a bank reconciliation.
 
Monthly check charges assessed by the bank
NSF customer check
Monthly bank service charge
   
Demonstrate the required adjusting entry needed to record a $1,000 note receivable collected by the bank by choosing the correct entry below
 
Debit Cash $1,000 and credit Notes Receivable $1,000.
   
Identify the bank reconciliation items that would require adjustments to the book balance.
 
NSF check
Interest earned
Collection of note by bank
Bank charges
   
Identify the item below that would be subtracted from the book balance on a bank reconciliation
 
NSF check
   
The formula to compute days' sales uncollected is:
 
accounts receivable divided by net sales times 365
   
Choose the statement below which is correct regarding which bank reconciliation items require adjusting journal entries.
 
Only the items reconciling the book balance require adjustment.
   
Good recordkeeping helps protect assets and helps managers:
 
Monitor company activities
   
Describe the internal control principle of dividing responsibility for related transactions
 
This principle helps to make sure that the work of one individual acts as a check on another individual's work on a related transaction.
This principle is often called separation of duties.
Examples of transactions with divided responsibility are placing inventory orders and paying vendors.
   
Define the Discounts Lost account by selecting the statements below that correctly describe this account (Check all that apply.)
 
This account alerts management when discounts are not taken for early payment.
It is reported on the income statement
It is an expense account.
It is debited when a discount is not taken and when using the net method of recording purchases
   
Which statement below describes the internal control procedure of insuring assets and bonding key employees?
 
Insuring assets against casualty and bonding employees who handle cash, reduces risk of loss
   
Which of the statements below explains the Internal control principle of performing regular and independent reviews?
 
Regular reviews of Internal control systems are needed to ensure that procedures are followed
   
Which statement below explains why liquid assets are needed in a business?
 
Liquid assets must be readily available to settle near-term debt or obligations
   
Determine which of the statements below describes a petty cash receipt. (Check all that apply.)
 
The petty cashier must present all paid receipts to the company cashier in order to replenish the fund
A petty cash receipt will have a signature line for the person receiving a disbursement from the fund.
A petty cash receipt is sometimes called a petty cash ticket
Any person wishing to withdraw fu n ds from a petty cash f und must complete a petty cash receipt.
   
Human ______________ (error/fraud) is related to misjudgment or confusion. Human ______________ (error/fraud)
involves intent to defeat internal controls for personal gain
 
Error; Fraud
   
The cash in a cash register equaled $100, but the record of cash receipts/sales equaled $102. Determine which of the
following entries is correct to record cash sales and the shortage.
 
Debit Cash                                                          $100
Debit Cash Over and Short                          $2
Credit Sales                                                        $102
 
Describe the purpose of a purchase order by selecting the correct statement(s) below. (Check all that apply.)
 
Multiple copies of the purchase order are distributed to other departments to Increase Internal control of company purchases.
A purchase order authorizes a vendor to ship ordered merchandise at a stated price and terms.
A purchase order is a document the purchasing department uses to place an order with a vendor.
   
Review the following statements and select the ones which accurately describe a Petty Cash fund
 
It is established to pay for small payments like postage, shipping fees, etc
It is an asset reported on the balance sheet
It is used to avoid the time and cost of writing checks for small amounts
   
Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for
its ____________ (near/long) -term obligations
 
Near
   
Given the choices below, choose the examples of internal controls designed to control cash disbursements. (Check all that apply.)
 
Use of a petty cash system.
All disbursements should be made by check.
Only authorized individuals should be allowed to sign checks.
Use of a voucher system.
   
Merchandisers earn net income by__________(buying/manufacturing) and ______________ (selling/purchasing) merchandise.
 
Buying; selling
   
Determine which of the statements below describes a petty cash receipt
 
A petty cash receipt is sometimes called a petty cash ticket
A petty cash receipt will have a signature line for the person receiving a disbursement from the fund
The petty cashier must present all paid receipts to the company cashier in order to replenish the fund
Any person wishing to withdraw funds from a petty cash fund must complete a petty cash receipt
   
Which of the answers below correctly describe the Cash Over and Short account?
 
It records the effects of cash overages and cash shortages
It is an income statement account
A debit balance reflects an expense
   
Which of the statements below explains how technology has Impacted Interna l control systems? (Check all that apply.)
 
Technologically advanced systems can record who made entries, the date and time of the entry and the source of the entry.
Technology can be designed to require the use of password before access to the system is granted.
Technologically has reduced the number of processing errors.
Technology has encouraged the growth of e-commerce, so there Is a higher risk of credit card number theft
   
Identify when the Petty Cash fund is debited or credited by selecting the correct answer below
When the account is increased
When the account is reduced
When the account is created
   
Explain how a voucher system strengthens the control over cash disbursements by selecting the correct statements below.
(Check all that apply.)
 
The person issuing a check to pay the voucher has proof than an obligation has been incurred.
The purchase requisition in a voucher system and its purchase order confirm tile purchase was authorized.
The invoice approval form in a voucher system verifies that the Invoice has been checked for errors.
The receiving report in a voucher system shows the items that have been received.
   
Jackson Co. needs to replenish its petty cash fund. Currently, it contains $11 in cash and receipts for supplies of $40 and
delivery expenses of $49. The fund was initially established with $100.
Demonstrate the journal entry to replenish the account by choosing the correct actions from those below.
 
Cash is credited for $89
Delivery Expense is debited for $49
Supplies Expense is debited for $40
   
Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for ________ (large/small)
payments in order to _________ (increase/avoid) the time and cost of writing checks for ________ (large/small) amounts
 
Small; Avoid; Small
   
Choose the list below that contains only cash or cash equivalents.
 
Customer checks, money orders, certified checks
   
Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period
 
Only the petty cashier is responsible for paying cash from the fund
   
A cash register tape reflected total sales equaling $100, but the cash in the cash register drawer equaled $105.
Review the statements below and determine which is correct regarding this discrepancy.
 
The Cash account will be debited for $105
The extra $5 collected will be treated as a miscellaneous revenue
The Cash Over and Short account will be credited for $5
The Sales account will be credited for $100
   
Jackson Brothers decided to create a petty cash fund. They estimated that $200 would be needed in the fund. Demonstrate
the correct journal entry to create the account by choosing the correct action from those below
 
Petty Cash is debited for $200; Cash is credited for $200
   
At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses
of $46. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account
by choosing the correct action from those given below.
 
Cash is credited for $96
   
Review the following statements and select the ones which accurately describe a Petty Cash fund.
 
It is established to pay for small payments like postage, shipping fees, etc.
It is used to avoid the time and cost of writing checks for small amounts.
It is an asset reported on the balance sheet.
   
Brown Co. decides to increase the amount in its petty cash fund from 100 to $150. To show this increase in the petty cash account, you would:
 
Debit Petty Cash for $50
   
Determine which of the statement(s) are correct if a Petty Cash account is not replenished at the end of the accounting period.
 
Expenses were not recorded in the period in which they were incurred
The balance sheet would show an overstated cash asset
The income statement would reflect a net income amount that was too high
   
Which of the statements below describes the internal control principle of applying technological controls?
 
Technological controls, such as time clocks and cash registers, improve the effectiveness of controls.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2