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| 1 | |
Which of the following is a purpose of an internal control system? |
| | A) | Protect assets |
| | B) | Ensure reliable accounting |
| | C) | Promote efficient operations |
| | D) | Urge adherence to company policies |
| | E) | All of the above |
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| 2 | |
If two sales clerks share the same cash register, which principle of internal control has been compromised? |
| | A) | Establishing responsibilities |
| | B) | Separate recordkeeping from custody of assets |
| | C) | Maintain adequate records |
| | D) | All of the above |
| | E) | None of the above |
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| 3 | |
Which of the following is not a principle of internal control? |
| | A) | Responsibilities should be clearly established |
| | B) | Adequate records should be maintained |
| | C) | Assets should be insured and employees bonded |
| | D) | Record-keeping and custody should be combined |
| | E) | Mechanical devices should be used whenever practical |
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| 4 | |
Which of the following assets bear the greatest risk of loss if proper internal controls are not in place? |
| | A) | Cash |
| | B) | Accounts Receivable |
| | C) | Fixed Assets |
| | D) | Supplies |
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| 5 | |
Which of the following is not a proper control of cash? |
| | A) | Handling cash is separate from recordkeeping of cash |
| | B) | Cash receipts should be deposited every other day in a bank |
| | C) | Cash disbursements should be made by check |
| | D) | Two people are assigned the task of opening cash receipts in mail. |
| | E) | A voucher system should be used for approving and paying cash disbursements. |
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| 6 | |
At the end of the day, the cashier: (1) counts the money in the cash drawer, (2) compares the cash count with the recorded sales for the day, and (3) makes notations of differences on a special report that is forwarded, along with the cash, to the accounting department. This procedure is which of the following? |
| | A) | Acceptable practice, adhering to internal control principles |
| | B) | Designed to provide adequate internal control over cash |
| | C) | Unacceptable practice, not following internal control principles |
| | D) | Follows the broad principle of internal control of insuring assets |
| | E) | None of the above |
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| 7 | |
Management's ability to monitor and control business operations is greatly improved with a computerized accounting system because of which of the following? |
| | A) | Separation of duties does not have to be maintained |
| | B) | More hard evidence in the form of written forms and documents are used |
| | C) | Less testing of records is possible |
| | D) | Data entry errors are always discovered in the early stages |
| | E) | Computers provide more rapid access to large quantities of information |
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| 8 | |
Technology impacts an internal controls system in which of the following way(s)? |
| | A) | It allows quicker access to databases and information which allows managers to make more timely decisions. |
| | B) | It creates more processing errors than a manual system by increasing the risk of mechanical or mathematical errors. |
| | C) | It allows for reduced testing of records during the audit process. |
| | D) | All of the above. |
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| 9 | |
Which of the following is an example of internal controls that could be put in place to help safeguard the risk of loss due to increased e-commerce transactions? |
| | A) | Firewalls |
| | B) | Encryption |
| | C) | Virus protection programs |
| | D) | All of the above |
| | E) | None of the above |
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| 10 | |
Which of the following would be a benefit of having employees bonded? |
| | A) | Bonding reduces the risk of loss to a company. |
| | B) | It discourages theft. |
| | C) | It helps insure key assets. |
| | D) | All of the above. |
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| 11 | |
Which of the following would require the Petty Cash account to be debited? |
| | A) | The petty cash fund is short by $3.50. |
| | B) | The petty cash fund is over by $4.50. |
| | C) | The petty cash account is being decreased. |
| | D) | The petty cash account is being created. |
| | E) | None of the above. |
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| 12 | |
If the petty cash fund is not replenished at the end of the accounting reporting period, which of the following will occur? |
| | A) | Net income will be understated or net loss will be overstated |
| | B) | Liabilities will be overstated on the balance sheet |
| | C) | The cash account will be understated |
| | D) | It indicates that the petty cash fund is probably short |
| | E) | The income statement and the balance sheet will not be correct |
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| 13 | |
To establish a petty cash fund for a department requires a journal entry that will do which of the following? |
| | A) | Debit Cash and credit Petty Cash |
| | B) | Debit Petty Cash and credit Cash |
| | C) | Debit Miscellaneous Expense and credit Cash |
| | D) | Debit Accounts Receivable and credit Petty Cash |
| | E) | Debit Accounts Payable and credit Petty Cash |
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| 14 | |
Which of the following would be an appropriate use for petty cash? |
| | A) | Postage due |
| | B) | Purchase of a computer |
| | C) | Loan to an employee |
| | D) | Advance on a payroll check |
| | E) | All of the above |
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| 15 | |
What document is used by the bank to verify signatures on checks? |
| | A) | A deposit ticket |
| | B) | A withdrawal ticket |
| | C) | A debit memorandum |
| | D) | A signature card |
| | E) | A bank statement |
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| 16 | |
Which of the following parties to a check would be considered the maker? |
| | A) | The recipient of the check |
| | B) | The bank on which the check is drawn |
| | C) | The one who signs the check on the face of the check |
| | D) | None of the above |
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| 17 | |
The bookkeeper recorded a bank deposit at $460, but the bank recorded the deposit at its correct amount of $640. (The depositor made the error.) How will this error be treated on the bank reconciliation? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 18 | |
How should a deposit in transit be treated on a bank reconciliation? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 19 | |
The bookkeeper recorded a check at $350.56 for store supplies. The bank recorded the check at its correct amount of $530.65. How will this error be treated on the bank reconciliation? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 20 | |
Which of the following items would not be an adjustment to the book balance of cash on a bank reconciliation? |
| | A) | Checks deemed to be non-sufficient (NSF) by the bank |
| | B) | Bank withdrawals for service fees |
| | C) | Collections by the bank of notes and interest |
| | D) | Outstanding checks |
| | E) | Errors made by the depositor |
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| 21 | |
What is the proper treatment on the bank reconciliation of a debit memorandum issued by the bank? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 22 | |
What is the proper treatment on the bank reconciliation of an EFT (out) that was not recorded on the books of the business? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 23 | |
What is the proper treatment on the bank reconciliation of a note collected by the bank for the depositor? |
| | A) | Addition per book balance of cash |
| | B) | Deduction per book balance of cash |
| | C) | Addition per bank statement balance |
| | D) | Deduction per bank statement balance |
| | E) | None of the above |
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| 24 | |
What is the proper journal entry to adjust the cash account for a check deemed NSF by the bank? |
| | A) | Debit Cash; Credit Accounts Receivable |
| | B) | Debit Bad Debt Expense; Credit Cash |
| | C) | Debit Accounts Receivable; Credit Cash |
| | D) | Debit Accounts Payable; Credit Cash |
| | E) | Debit Miscellaneous Expense; Credit Cash |
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| 25 | |
On the December 31 financial statements, the following balances were reported: | Cash | $ 40,000 | | Accounts Payable | $ 12,000 | | Accounts Receivable | $ 17,000 | | Sales | $160,000 |
What is the Days' Sales Uncollected? |
| | A) | 3.87 days |
| | B) | 38.78 days |
| | C) | 9.28 days |
| | D) | 126.41 days |
| | E) | None of the above |
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| 26 | |
Which of the following is true with regard to the number of days' sales collected? |
| | A) | It measures how quickly a company can covert its Accounts Receivable to cash. |
| | B) | It measures how long it takes a company to sell an item in inventory. |
| | C) | The higher the number, the better the collection efforts of the company. |
| | D) | All of the above. |
| | E) | None of the above. |
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| 27 | |
THE NEXT TWO QUESTIONS RELATE TO THE VOUCHER SYSTEM PROCEDURES PRESENTED IN APPENDIX A OF CHAPTER 6. Under a voucher system, which document is used to inform the purchasing department of merchandise needed to be purchased? |
| | A) | A purchase requisition |
| | B) | A purchase order |
| | C) | An invoice approval |
| | D) | A receiving report |
| | E) | None of the above |
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| 28 | |
Assume that a business uses the following documents in its voucher system: | A. Purchase requisition | | B. Voucher approved and paid | | C. Receiving report | | D. Invoice approval form | | E. Invoice (prepared by vendor) | | F. Purchase order |
What is the proper sequence in which the documents will be prepared? |
| | A) | A, B, C, D, E, F |
| | B) | A, D, C, E, F, B |
| | C) | A, F, E, C, D, B |
| | D) | A, F, C, E, D, B |
| | E) | None of the above |
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| 29 | |
THE NEXT THREE QUESTIONS RELATE TO THE NET METHOD TO CONTROL PURCHASE DISCOUNTS PRESENTED IN APPENDIX B OF CHAPTER 6. Merchandise is purchased using the net method. An invoice with a list of items totaling $10,000 is received. Cash terms listed on the invoice are 2/10, n/30. The entry to record this purchase will include a debit to the Merchandise Inventory account for which amount? |
| | A) | $ 10,000 |
| | B) | $ 9,900 |
| | C) | $ 9,850 |
| | D) | $ 9,800 |
| | E) | None of the above |
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| 30 | |
Merchandise is purchased using the gross method of accounting for discounts. An invoice with a list of items totaling $10,000 is received. Cash terms listed on the invoice are 2/10, n/30. The entry to record this purchase will include a debit to the Merchandise Inventory account for which amount? |
| | A) | $ 10,000 |
| | B) | $ 9,900 |
| | C) | $ 9,850 |
| | D) | $ 9,800 |
| | E) | None of the above |
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| 31 | |
What type of account is Discounts Lost? |
| | A) | Asset |
| | B) | Liability |
| | C) | Contra Liability |
| | D) | Revenue |
| | E) | Expense |
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