ACCT 211 Read & Interact Chapter 6 Cash, Fraud, and Internal Control solutions complete answers

ACCT 211 Read & Interact Chapter 6 Cash, Fraud, and Internal Control solutions complete answers 

 

The following annual account balances are taken from ABC Co at year end.

   

Select the statements below that are correct regarding ABC Co.'s ability to collect its receivables from customers.

 

Identify the statement below that describes what the Days' sales uncollected ratio assesses.

 

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its   liabilities.

 

Auditors focus more on testing the ____ of a company's blockchain processes and technology than on verifying the ___ of its output.

 

Each of the following are types of technological impacts related to internal control:

 

The triple threat of fraud involves:

 

All of the following describe blockchain:

 

Explain how a voucher system strengthens the control over cash disbursements by selecting the correct statements below. (Check all that apply.)

 

Summarize the information included on the inside and the outside of a voucher by selecting the correct items below. (Check all that apply.)

 

Describe what an invoice approval is by selecting the correct answer below.

 

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.

 

An invoice       includes a checklist of steps necessary for approving an invoice for recording and payment.

 

The document which includes an itemized statement of goods prepared by the vendor is called a(n) _____.

 

The document used by the purchasing department to place an order is called a(n) purchase _____.

 

Describe the purpose of a purchase requisition by selecting the correct answer below. (Check all that apply.)

 

The following annual account balances are taken from ABC Co at year end.

 

Calculate ABC Co.'s days sales uncollected for 2015.

 

A receiving report is used for each of the following (select all answers which apply).

 

Describe the purpose of a purchase order by selecting the correct statement(s) below. (Check all that apply.)

 

The formula to compute days' sales uncollected is:

 

Determine which of the statements below accurately describe services provided by a bank. (Check all that apply.)

 

Which of the statements below describe the goals and principles of cash management? (Check all that apply.)

 

Review the following statements and select the ones which accurately describe a Petty Cash fund. Select all answers which apply.

 

Which statement below explains why liquid assets are needed in a business?

 

A good internal control to protect cash is to make cash payments using

 

Which of the following are principles of internal control? (Check all that apply.)

 

Define what liquidity means by completing the following sentence. Liquidity refers to a company's ability to pay for its      (near/long) -term obligations.

 

Identify the basic internal control guidelines which should be in place to protect a business's cash by selecting the correct answers below. (Check all that apply.)

 

What is the purpose of internal controls?

 

Human (error/fraud)       is related to misjudgment or confusion. Human (error/fraud)       involves intent to defeat internal controls for personal gain. 

 

Recall the preparation of a bank reconciliation by selecting the correct items below.

 

Contrast how a depositor's account is classified by a bank compared to how it is classified by the account owner by completing the following sentence.


A depositor's account is a(n) _______ on the bank's records, but it is a(n) ______ on the books of the account owner. Because of this, every time the account owner makes a deposit, the bank _____ the account owner's account.

 

Summarize the internal control principle of establishing responsibility by completing the following sentence.

Proper internal control means that responsibility for a ________ is clearly ________ and assigned to one person.

 

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.

 

Match the banking term on the left with its definition on the right.

 

Which of the following are correct regarding why management uses internal controls? (Check all that apply.)

 

Demonstrate the required adjusting entry needed to record a $1,000 note receivable collected by the bank less the expense of having the bank perform the service ($30), by choosing the correct entry below.

 

Describe the internal control principle of separating recordkeeping from custody of assets by completing the following sentence.


A person who ________ or has access to an asset must ________ keep that asset's accounting records.

 

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.

 

Which of the answers below correctly describe the Cash Over and Short account? (Check all that apply.)

 

Review the items below and determine which would cause an increase in the monthly bank statement balance.

 

Choose the items below that would be subtracted from the book balance on a bank reconciliation.

 

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 these below.

 

An invoice can be described as an itemized statement of goods prepared by the     listing the customer’s name, items sold, sales prices and terms of sale.

 

Internal control policies and procedures have limitations that arise from many elements. Match the limitation on the left with its definition on the right.

 

Summarize the document flow, or steps, in a voucher system by placing the following actions in their correct order of occurrence.

 

Choose the items below that would be added to the book balance on a bank reconciliation. (Check all that apply.)

 

After posting the required adjusting journal entries from the bank reconciliation below, show what the balance of the Cash account in ABC Co.’s general ledger will be by selecting the correct answer below.

 

Identify the bank reconciliation items that would require adjustments to the book balance.

 

Review the items below and determine which would cause a decrease in the monthly bank statement balance.

 

Determine which of the items below would show up on a monthly bank statement.

 

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.

 

The bank reconciliation of ABC Co. is provided below. Demonstrate the required adjusting entries needed to update the Cash account in the general ledger by selecting the correct entries below.

 

Calculate the adjusted cash balance per books of ABC Co. given the following information.

 

A bank reconciliation is a(n)     explaining any differences between the     account balance according to the depositor’s records and the balance reported on the     statement.

 

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.

 

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence.

 

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $5 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 and recognize the cash shortage by choosing the correct actions from those given below. (Check all that apply.)

 

A petty cash fund is used for ____________ payments in order to ______________________ the time and costs of writing checks for _________ amounts.

 

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct.

 

1.
Calculate the adjusted cash balance per books.
 
 
2.
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.
 
 
5.
Choose the statement below which is correct regarding which bank reconciliation items require adjusting journal entries.
 
 
7.
Determine the statements below that are true regarding why a bank reconciliation is used. (Check all that apply.)
 
 
8.
Determine which of the items below would appear in the Checks and Debits column of a bank statement and would cause a decline in the account's balance.
 
 
9.
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.
 
 
12.
Identify the examples of good internal controls designed to protect cash received in the mail.
 
 
14.
Identify the item below that would be added to the book balance.
 
 
16.
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.
 
 
18.
Recall the steps in preparing a bank reconciliation by selecting the correct items below:
 
 
22.
Select the items below that would cause the bank statement balance to differ from the depositor's book balance:
 
 
24.
A voucher is an _______________ document (or file) used to accumulate information to ______________ cash disbursements and to ensure that a transaction is properly recorded.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

2.
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 $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.
 
 
4.
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:
 
 
5.
Calculate the adjusted cash balance per the books of XYZ Co. given the following information. 
Balance per bank statement $600
Balance per general ledger cash account 710
Deposit in transit 200
Note collected by the bank on behalf of the depositor 80
Monthly bank charges 40
Outstanding checks 50
 
 
6.
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. (Check all that apply.)
 
 
8.
Choose the list below that contains only cash or cash equivalents.
 
 
9.
Choose the statement below which is correct regarding which bank reconciliation items require adjusting journal entries.
 
 
11.
Define what a voucher is by completing the following sentence.
A voucher is an ____ document (or file) used to accumulate information to ____ cash disbursements and to ensure that a transaction is properly recorded.
 
 
12.
Define what liquidity means by completing the following sentence.
Liquidity refers to a company's ability to pay for its _____ -term obligations.
 
 
15.
Describe what a petty cash fund is by completing the following sentence.

A petty cash fund is used for ______________ payments in order to _______ the time and cost of writing checks for _____ amounts.
 
 
16.
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. (Check all that apply.)
 
 
17.
Determine which of the items below would show up on a monthly bank statement. (Check all that apply.)
 
 
18.
Determine which of the statements below are accurate regarding how a petty cash fund is created and used in a business. (Check all that apply.)
 
 
19.
Determine which of the statements below is correct regarding information reflected on a monthly bank statement.
 
 
20.
Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.
 
 
 
 
 
 
 
 
 
 
 
 

21.
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 _____ records and (b) comparing ____ checks on the bank statement with _______ recorded in the accounting records.
 
 
22.
Identify the bank reconciliation items that would require adjustments to the book balance. (Check all that apply.)
 
 
23.
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.
 
 
25.
Identify the item below that would be subtracted from the book balance on a bank reconciliation.
 
 
26.
Identify the principles of internal control by selecting the correct answers below. (Check all that apply.)
 
 
27.
Identify which of the items below are goals of good cash management. (Check all that apply.)
 
 
28.
In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the order of occurrence.
 
 
 
 
 
 
 
 
 

33.
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 and recognize the cash shortage by choosing the correct actions from those given below. (Check all that apply.)
 
 
35.
Review the items below and determine which would cause a decrease in the monthly bank statement balance.
 
 
37.
Review the statements below to determine the correct definition of a credit memorandum.
 
 
38.
Review the statements below to determine the correct definition of debit memorandum.
 
 
39.
Show your understanding of what a bank reconciliation is by completing the following sentence. 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.
 
 
 
 
 
 
 
 
 

42.
Summarize the internal control procedure of maintaining adequate records by selecting the correct answers below. (Check all that apply.)
 
 
45.
Which of the statements below explains how technology has impacted internal control systems? (Check all that apply.)
 
 
46.
Which of the statements below explains the internal control principle of performing regular and independent reviews?
 
 
 
 
 
 
 
 
 

The following appear on a monthly bank statement:

 

Checks written by the account owner can cause a decrease in the monthly bank statement balance

 

Items added to the book balance on a bank reconciliation:

 

A petty cash fund is used for small payments in order to avoid the time and cost of writing checks for small amounts.

 

How a petty cash fund is used in business:

 

To create a petty cash fund with an estimation of $200 needed in the fund, debit Petty Cash (an asset account) by $200 and credit Cash by $200 (increasing petty cash)

 

Decreasing petty cash (from $200 to $130)

 

Items subtracted from the book balance on a bank reconciliation:

 

Items added to the book balance on a bank reconciliation:

 

The adjusted bank balance must equal the adjusted book balance (adjusted cash balance per books)

 

Factors in causing the bank statement balance to differ from the depositor’s book balance:

 

Adjusting entries from a bank reconciliation (example problem p.21)

 

Cash Over and Short (income statement account):  Errors between cash in a cash register and the record of the amount of cash receipts. At the end of the work period, the cash in a cash register might not equal the record of cash receipts.

 

The following would appear in the Debits and Credits column of a bank statement and would cause an increase in the account’s balance.

 

Monthly bank reconciliation steps:

 

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.

 

A voucher is an internal document /file used to accumulate information to control cash disbursements and to ensure that a transaction is properly recorded.

 

Purpose of internal controls: companies create internal controls to safeguard assets and control business activities

 

Voucher system: a set of procedures and approvals designed to control cash disbursements

 

Steps in a voucher system:

 

Internal control principle of separating recordkeeping from custody of assets: A person who controls or has access to an asset must not keep that asset’s accounting records.

 

Banking terms:

 

Internal control principle of dividing responsibility:

 

Days’ sales uncollected = (Accounts receivable/net sales) x 365

 

IFRS and US GAAP

 

An invoice is an itemized statement of goods prepared by the vendor listing the customer’s name, items sold, sales prices and terms of sale.

 

Liquid assets are needed in a business because they must be readily available to settle near-term debt or obligations.

 

Purpose of purchase requisition:

 

Error testing includes:

 

Principles of Internal Control are to:

 

The bank notifies the depositor of each deduction to the account with a debit memorandum

 

The bank notifies the depositor of each increase to the account with a credit memorandum

 

Purpose of a purchase order:

 

A depositor’s account is a liability on the bank’s records, but it is an asset on the books of the account owner. Because of this, every time the account owner makes a deposit, the bank credits the account owner’s account.

 

Goals of good cash management:

 

An invoice approval is completed by the accounting department to approve an invoice for payment

 

Internal control principle of applying technological controls: technological controls, such as time clocks and cash registers help improve the effectiveness of controls

 

Internal controls designed to control cash disbursements:

 

 

The bank reconciliation of XYZ Co. is provided below. Demonstrate the entries needed to update the cash account in the general ledger by selecting the correct answers below?

 

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for small(large/small) payments in order to avoid(increase/avoid) the time and cost of writing checks for small(large/small) amounts.

 

Calculate the adiusted cash balance per the books of >NZ Co.given the following information. Balance per bank statement $600

 

Determine which of the statements below is correct regarding information reflected on a monthly bank statement?

 

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. (Check all that apply.)

 

Determine which of the items below would appear in the Checks and Debits column of a bank statement and would cause an increase in the account's balance. (Check all that apply.)

 

Gummy Co. purchased merchandise on June 10 at a $9,000 Invoice price with terms of 2/10,n/30 and paid for the merchandise on June 30. Illustrate the required entries to record and pay for this purchase under the gross method and net methods by matching the action on the left with the method on the right (Assume a perpetual Inventory system Is used.)

 

XYZ Co. decided to create a petty cash fund. They estimated that $100 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below

 

Given the bank reconciliation below, show what the effect on the Cash balance in the general ledger will be by selecting the all of the correct answers below

 

Choose the statement below which is correct regarding which bank reconciliation Items require adjusting journal entries.

 

Review the items below and determine which would cause an decrease in the monthly bank statement balance.

 

Liquidity refers to a company’s ability to pay for 

 

Determine which of the items below would appear in the Checks and Debits column of a bank statement and would cause a decline in the account's balance. (Check all that apply.)

 

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 the examples of i<>od Internal controls deslO>ed to protect cash received In the mal. (Check all Iha! apply,)

 

Describe what a voucher system is by selecting the correct statement below.

 

ABC 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.)

 

Review the statements below to determine the correct definition of a debit memorandum.

 

Given the choices below, choose the examples of internal controls designed to control cash disbursements. (Check all that apply.)

 

Define what a voucher is by completing the following sentence. A voucher is an internal (internaljexternal) document (or file) used to accumulate information to control (reduce/control) cash disbursements and to ensure that a transaction is properly recorded.