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Exam 7: Internal Control and Cash

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Question 61

True/False

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The principles of internal control include: ensure transactions and activities are authorized, maintain records, insure assets, separate recordkeeping and custody of assets, and perform internal and external audits.

A) True
B) False

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Question 62

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Risks involved in e-commerce include

A) Firewalls
B) Encryption
C) Missing documents
D) Computer viruses
E) All of the above

F) A) and B)
G) B) and E)

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Question 63

Multiple Choice

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The impact of technology on internal controls includes

The following information refers to Annie's Attic and competitors in the antiques business. $\begin{array} { | l | r | r | } \hline & \text { Current Ratio } & \text { Quick Ratio } \\\hline \text { Arrie's Attic } & 1.7 \text { to } 1 & .85 \text { to } 1 \\\hline \text { Bart's Basernent } & 1.3 \text { to } 1 & .90 \text { to } 1 \\\hline \text { Chisolm's Collectibles } & 1.5 \text { to } 1 & 1.1 \text { to 1 } \\\hline \text { Martin's Meubles } & 1.6 \text { to 1 } & .7 \text { to } \\\hline\end{array}$ Information: Comment on the relative liquidity positions of the companies.

Discuss how banking activities promote the control of cash.

Bank debit cards get their name from

Which of the following is NOT a principle of internal control?

Maintaining a petty cash fund makes it possible to determine human fraud.

Identify the principles of internal control.

The following information was available for Rachel Supply Company for the month ended May 31, 2020. (a) On May 31, 2020 the Cash account of Rachel Supply Compary had a balance of $\$ 25,850$ (b) On May 31,2020 the bank statement indicated a balarce of $\$ 44,580$ . (c) The bank reported the collection of a note receivable for Rachel of $\$ 4,300$ plus $\$ 500$ irterest. (d) It was observed that the bank statement did not include a deposit of $\$ 2,700 \mathrm { made }$ by Rachel on May 31 and that cheques totalling $\$ 15,830$ issued by Rachel had not cleared the bank (e) Rachel recorded ant insurance expense payment of $\$ 150$ as $\$ 1,500$ . (f) Service charges of $\$ 50$ were charged for cheque printing Prepare the bank reconciliation Prepare the bank reconciliation at May 31, 2020.

The payee is the person who signs a cheque.

A bank reconciliation results in creating an adjusted bank balance as well as an adjusted book balance.

In reconciling the bank balance, an unrecorded debit memorandum for printing cheques should be

Outstanding cheques are cheques that

A good system of internal control

An error made by the bank should result in a reconciling item on the book side of a bank reconciliation.

A cheque that was outstanding on last month's bank reconciliation was not among the cancelled cheques returned by the bank this month. As a result, in preparing this month's reconciliation, the amount of this cheque should be

Risks involved in e-commerce include: credit card theft, computer viruses and impersonation.

Banks normally use a flat rate fee for the processing of debit card transactions and a percentage fee for the processing of credit card transactions.

Internal control policies and procedures are standard across companies.