Question 1

Which of the following statements describes a purchase order?

Accepted Answer

A purchase order is a document issued by a buyer to a supplier, indicating the types, quantities, and agreed prices for products or services the supplier will provide to the buyer.

Question 2

Which of the following statements describes an invoice from a supplier?

Accepted Answer

An invoice from a supplier is a document that lists the goods or services provided and the amount due for payment.

Question 3

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

Accepted Answer

This is known as segregation of duties and helps in preventing fraud or error in the payment process by ensuring that no single individual has too much control or influence over any single transaction.

Question 4

The use of electronic data interchange (EDI)bypasses the need for people and documents in cash payment procedures.

Accepted Answer

EDI enables the exchange of business documents and transactions electronically, eliminating the need for manual processing and paperwork, including cash payment procedures.

Question 5

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

Accepted Answer

The key to strong control over petty cash is to ensure that only one person serves as custodian at a time. This helps to prevent discrepancies and ensures accountability for any cash disbursements. Having multiple custodians would make it harder to track who is responsible for any missing or misused funds.

Question 6

The journal entry to replenish a petty cash fund includes a debit to the petty cash account and a credit to the expense account.

Accepted Answer

The journal entry to replenish a petty cash fund includes a debit to the expense account and a credit to the petty cash account. This reflects that the expense has been incurred and the petty cash fund needs to be reimbursed.

Question 7

Which of the following should the purchasing agent NOT be able to do?

Accepted Answer

The purchasing agent should not approve the payment as it could lead to a conflict of interest and lack of segregation of duties, which is important for internal control.

Question 8

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

Accepted Answer

When opening a new petty cash fund, cash is taken out of the main cash account and put into the petty cash account. Therefore, the journal entry will include a debit to the petty cash account and a credit to the main cash account, also known as cash in bank.

Question 9

If a single person is authorised to both order goods and approve payments, the company may be defrauded in several ways. Which of the following scenarios would NOT be a possible consequence of this control weakness?

Accepted Answer

The scenario where goods received may be damaged in shipment is not directly related to the control weakness of a single person being authorized to both order goods and approve payments. This issue is more related to shipping and handling rather than a conflict of interest or fraudulent activity.

Question 10

A document authorising a cash payment is a(n):

Accepted Answer

A voucher is a document that authorises a cash payment.

Question 11

Cash in the bank is more liquid than a petty cash fund.

Accepted Answer

Petty cash is more liquid than cash in the bank because none of the bank controls are in place.

Question 12

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.

Accepted Answer

Petty cash is indeed a fund containing a small amount of cash used for minor expenses such as office supplies or reimbursements for employees.

Question 13

Which of the following statements describes a voucher?

Accepted Answer

A voucher is a document that authorizes a payment to a supplier, often used in accounting to ensure that payment is made for goods or services received.

Question 14

Which of the following is NOT an advantage of evaluated receipts settlement (ERS)?

Accepted Answer

ERS does not specifically avoid the need for two signatures on a cheque; it is primarily focused on streamlining the invoicing and payment process by eliminating the need for invoices.

Question 15

Which of the following items is NOT required to be examined by the controller or treasurer before signing a cheque?

Accepted Answer

The journal entry is not typically examined before signing a cheque, as it is an internal accounting record rather than a document directly related to the transaction's authorization and verification process.

Question 16

Which of the following should the purchasing agent NOT be able to do?

Accepted Answer

The purchasing agent should not be able to receive the goods because this is typically the responsibility of the receiving department.

Question 17

Which of the following statements describes a receiving report?

Accepted Answer

A receiving report is a document that confirms the receipt of goods in good condition, as ordered, typically used in the receiving process of inventory management.

Question 18

In a system of good internal control, a payment to a supplier requires which documents for proper approval?

Accepted Answer

A receiving report, an invoice, and a purchase order are essential documents in a system of good internal control to ensure that the goods were ordered, received, and billed correctly before making a payment to a supplier.

Question 19

A company cheque for payment must be signed by:

Accepted Answer

A company cheque must be signed by a person specifically authorized by the company to ensure that the payment is legitimate and approved by the company.

Question 20

Which of the following is the first step in the purchasing and payment process?

Accepted Answer

The first step in the purchasing and payment process is for the purchaser to send a purchase order to the supplier, initiating the transaction.

Quiz 8: Internal Control and Cash

Which of the following statements describes a purchase order?

Which of the following statements describes an invoice from a supplier?

For good controls over cash payments, the person who orders goods from a supplier should always be different from the person who approves the payment.

The use of electronic data interchange (EDI)bypasses the need for people and documents in cash payment procedures.

A key to strong control over petty cash is to ensure that several persons serve as custodian at one time.

The journal entry to replenish a petty cash fund includes a debit to the petty cash account and a credit to the expense account.

Which of the following should the purchasing agent NOT be able to do?

The journal entry to open a new petty cash fund includes a debit to the petty cash account and a credit to cash in bank.

If a single person is authorised to both order goods and approve payments, the company may be defrauded in several ways. Which of the following scenarios would NOT be a possible consequence of this control weakness?

A document authorising a cash payment is a(n) :

Cash in the bank is more liquid than a petty cash fund.

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures.

Which of the following statements describes a voucher?

Which of the following is NOT an advantage of evaluated receipts settlement (ERS) ?

Which of the following items is NOT required to be examined by the controller or treasurer before signing a cheque?

Which of the following should the purchasing agent NOT be able to do?

Which of the following statements describes a receiving report?

In a system of good internal control, a payment to a supplier requires which documents for proper approval?

A company cheque for payment must be signed by:

Which of the following is the first step in the purchasing and payment process?