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1
Internal control systems provide guarantees against losses and errors in accounting.
A)True
B)False
2
One of the requirements of the Sarbanes-Oxley Act is that each annual report contain an internal control report.
A)True
B)False
3
Using pre-numbered sales slips (where the numbers are controlled) is a step that can assist in strengthening internal controls.
A)True
B)False
4
With the increasing use of computers for processing accounting information, internal control may depend more on reviews of the design and operations of the computerized accounting system and less on the reviews of documents left behind by the system.
A)True
B)False
5
Technology and internal control has reduced processing errors and provides much more extensive testing of the records.
A)True
B)False
6
Company's that have a no-vacation policy for employees that handle cash can increase the strength of their internal controls.
A)True
B)False
7
There are 4 basic principles of internal control.
A)True
B)False
8
A person who controls or has access to an asset should also keep that asset's accounting records.
A)True
B)False
9
The concept of collusion means that to steal an asset and hide the theft from the records, two or more people must agree in secret to commit the fraud.
A)True
B)False
10
Bank reconciliations should be prepared at least annually.
A)True
B)False
11
One of the responsibilities of the cashier should be to prepare the bank reconciliation.
A)True
B)False
12
The only limitation companies face with internal control systems is from the cost-benefit principle.
A)True
B)False
13
For good cash control, the custody of cash should be included with the record keeping of cash.
A)True
B)False
14
Temporary liquid investments that can be easily and quickly converted to cash are a form of cash equivalents.
A)True
B)False
15
A characteristic of an asset that refers to how easily the asset can be converted into another type of asset is called liquidity.
A)True
B)False
16
A U.S. Treasury bill with a maturity date within the next three months is classified as a cash equivalent.
A)True
B)False
17
When there is a difference between recorded cash sales and the count of cash in the cash register, the difference is recorded in an account called petty cash.
A)True
B)False
18
The cash over and short account should appear on the balance sheet in the current assets section.
A)True
B)False
19
The cash in the register totals $607 after deducting the beginning change fund. The master tape in the register reports sales for the day at $605. The register has a $1 cash shortage.
A)True
B)False
20
The Cash Over and Short account can be treated as either a miscellaneous revenue account or as a miscellaneous expense account, depending upon its balance.
A)True
B)False
21
A journal entry is made each time a petty cash disbursement is made.
A)True
B)False
22
The reimbursement of a petty cash fund will require a debit to the Petty Cash account for the amount of the replenishment.
A)True
B)False
23
Net income could be overstated if the petty cash fund is not reimbursed at the end of the accounting period.
A)True
B)False
24
An analysis prepared to explain the difference between the balance of the checking account of the depositor and the checking account balance shown on the bank statement is called the bank reconciliation.
A)True
B)False
25
A check involves three parties: a payee who signs the check, a maker who is the recipient and a bank on which the check is drawn.
A)True
B)False
26
Canceled checks have been paid by the bank and deducted from the customer's account.
A)True
B)False
27
Electronic funds transfer (EFT) is electronic communication transfer of cash from one party to another.
A)True
B)False
28
When a bank reduces the depositor's checking account for service charges or other items, the bank sends the depositor a credit memorandum.
A)True
B)False
29
Credit memorandums from the bank produce debits on the depositor's books.
A)True
B)False
30
Deposits in transit are a common reconcilement item in the computation of the adjusted book balance of cash on a bank reconciliation.
A)True
B)False
31
It is not possible for the bank statement to show a larger ending cash balance than the ending cash balance shown on the balance sheet.
A)True
B)False
32
If the bank has recorded a deposit of $1,112 in error as $1,121, after the bank is notified and the error is verified, a journal entry will be required on the books of the depositor.
A)True
B)False
33
Cashier checks, certified checks, and money orders are examples of cash equivalents.
A)True
B)False
34
Petty cash activities are part of an imprest system of accounting.
A)True
B)False
35
When preparing the bank reconciliation, it is discovered that a check for the $97.00 telephone bill was written correctly for that amount but recorded in error in the depositor's journal at $79.00. This error will require a journal entry to correct the balance of the Cash account.
A)True
B)False
36
A measure of the liquidity of receivables is called the day's sales uncollected.
A)True
B)False
37
The number of days' sales in receivables is calculated by dividing Accounts Receivable by Net sales and then multiplying the amount by 365.
A)True
B)False
38

THE FOLLOWING SEVEN QUESTIONS RELATE TO THE VOUCHER SYSTEM PRESENTED IN APPENDIX A OF CHAPTER 6.

A voucher system is a set of procedures and approvals designed to control cash disbursements and acceptance of obligations.

A)True
B)False
39
The business form used by the purchasing department authorizing a vendor to ship merchandise or supplies is called a purchase requisition.
A)True
B)False
40
In a voucher control system a purchase requisition is prepared before a purchase order is completed.
A)True
B)False
41
Verification that all goods ordered and listed on the purchase invoice have arrived is completed on the invoice approval form.
A)True
B)False
42
An itemized statement of goods prepared by the vendor and sent to the customer (buyer) is called an invoice approval.
A)True
B)False
43
A form used within a company to notify the appropriate persons that ordered goods have been received is the purchase order.
A)True
B)False
44
In a voucher system, the documents are used in the following order: (1) purchase order, (2) purchase requisition, (3) receiving report, and (4) invoice approval.
A)True
B)False
45

THE FOLLOWING THREE QUESTIONS RELATE TO THE NET METHOD TO CONTROL PURCHASE DISCOUNTS PRESENTED IN APPENDIX B OF CHAPTER 6.

The advantage of using the net method of recording purchases of merchandise over the gross method of recording purchases of merchandise is that the net method provides a way to determine the amount of discounts lost.

A)True
B)False
46
If a company purchases inventory for $1,300 with terms of 2/10, n/30, the journal entry to record the purchase would debit the Merchandise Inventory account for $1,274, assuming the gross method is used.
A)True
B)False
47
When purchases are recorded under the net method, failure to take advantage of cash discounts, and the resultant loss of the discount, is charged to the Sales Discount account.
A)True
B)False





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