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Exam 8: Cash and Internal Controls

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Question 51

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Following are seven items a through g that would cause Xavier Company's book balance of cash to differ from its bank statement balance of cash. a. A service charge imposed by the bank. b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month. c. A customer's check returned by the bank is marked "Not Sufficient Funds(NSF)". d. A deposit that was mailed to the bank on the last day of the current month and is unrecorded on this month's bank statement. e. A check paid by the bank at its correct $190 amount was recorded in error in the company's Check Register at $109. f. An unrecorded credit memorandum indicated that bank had collected a note receivable for Xavier Company and deposited the proceeds in the company's account. g. A check was written in the current period that is not yet paid or returned by the bank. Indicate where each item a through g would appear on Xavier Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below.

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Question 52

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On November 1, a company established a $90 petty cash fund. On November 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $34.50; and office supplies, $36. Give the entry to reimburse the fund and to increase its amount to $150 on November 12.

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Question 53

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Match the following terms a through j with the appropriate definition 1 through 10.

The internal document that is prepared to notify the appropriate persons that ordered goods have been received and describes the quantities and condition of the goods is the

A company records purchases using the net method. On February 1, they purchased merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1 journal entry to record this transaction would include a:

When a voucher system is used, recording a purchase is initiated by an invoice approval and a voucher, not an invoice.

The internal document prepared by a department manager that informs the purchasing department of its needs that lists the merchandise needed and requests that it be purchased is the

The entry necessary to establish a petty cash fund should include:

Explain the difference between cash and cash equivalents.

The impact of technology on internal controls includes:

Principles of internal control include all of the following except:

A __________________________ is a document explaining the payment of a check.

Two sales clerks should not share the same cash register. This is an example of the internal control principle of ______________________.

The Petty Cash account is a separate checking account used for small amounts.

An internal control system consists of the policies and procedures companies use to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.

Discuss the purpose of a bank reconciliation.

What is the purpose of the petty cash account?

Internal control in technologically advanced accounting systems depends more on the design and operation of the information system and less on the analysis of its resulting documents.

_________________________ is the use of electronic communication to transfer cash from one party to another.

The document that is an itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales prices, and terms of the sale is the _________________________.