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Exam 8: Cash and Internal Controls

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Question 71

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A company plans to decrease a $200 petty cash fund to $75.The current balance in the account includes $45 petty cash payment in receipts and $165 in currency.The entry to reduce the fund will include a:

A) Debit to Cash Short and Over for $10.
B) Debit to Cash for $90.
C) Debit to Miscellaneous Expenses for $35.
D) Credit to Petty Cash for $165.
E) Credit to Cash for $90.

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

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Question 72

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

A) True
B) False

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Question 73

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The principles of internal control include: establish responsibilities,maintain adequate records,insure assets,separate recordkeeping from custody of assets,and perform regular and independent reviews.

What is the purpose of the petty cash account?

On June 3,a company received and recorded a $4,500 invoice for merchandise on which the terms were 2/10,n/60.The company records invoices at net amounts.On June 23,the company discovered that the invoice had been incorrectly filed and the discount lost.Prepare the June 3 general journal entry to record the purchase,the June 23 entry to record the discount lost,and the August 2 entry to record payment of the invoice.

The number of days' sales uncollected:

The following information is available for the Edwards Company for its March 31 bank reconciliation: From the March 31 bank statement: NSF: A check from a customer,Cook Co.in payment of their account. IN: Interest earned on the account. From the Edwards Company's accounting records: 1.Based on the above information,prepare a bank reconciliation for the Edwards Company. 2.Prepare the necessary general journal entries to adjust cash to the reconciled balance.

A ________________ fund is used for the control of small amounts of cash disbursements.

A voucher system establishes procedures for verifying,approving,and recording obligations for eventual cash disbursement.

Basic bank services such as bank accounts,bank deposits,and checking contribute to the control and safeguarding of cash.

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

The gross method of recording purchases refers to the method of recording:

The following information is taken from Hogan Company's December 31 balance sheet: If net credit sales and cost of goods sold for the current year were $612,000 and $367,200,respectively,the firm's days' sales uncollected for the year is:

Having external auditors test the company's financial records and evaluate the effectiveness of the internal control system is part of the internal control principle of ___________________.

Internal control of cash receipts aims to ensure that all cash received is properly recorded and deposited.

On August 17,at the end of the day,the cash register's record shows $957,but the count of cash in the register is $965.Prepare the general journal entry to record the day's cash sales.

Identify each of the following items 1 through 10 as either (A)cash or (B)cash equivalent. _____ 1.Coins _____ 2.Petty cash _____ 3.Three-month certificate of deposit _____ 4.Commercial paper _____ 5.Currency _____ 6.Certified check _____ 7.Cashier's check _____ 8.Money market accounts _____ 9.Money orders _____ 10.U.S.treasury bills

The Cash Over and Short account:

A company's internal control system:

A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.