Question 1

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.

Accepted Answer

This is the correct definition of an invoice.

Question 2

Assume that cash sales according to the register file total $705 but the amount of cash in the register is $685.This cash shortage of $20 represents a Miscellaneous Expense.

Accepted Answer

The cash shortage of $20 is a discrepancy between the expected cash sales ($705) and the actual cash in the register ($685). This discrepancy is classified as a Miscellaneous Expense.

Question 3

An effective voucher system has limited ability to prevent a dishonest employee from colluding with a dishonest supplier to fraudulently acquire cash payments for goods and services not received.

Accepted Answer

The answer of An effective voucher system has limited ability...

Question 4

An NSF check for $17.50 would be recorded as a debit to Cash and a credit to Accounts Receivable.

Accepted Answer

An NSF (non-sufficient funds) check means that the check cannot be cashed due to insufficient funds in the account. Therefore, it should be recorded as a debit to Accounts Receivable (since the payment was not received) and a credit to Cash (since the check bounced and the funds were not received).

Question 5

It is not necessary for businesses to reconcile their checking accounts since banks keep accurate records and provide internal control support for cash.

Accepted Answer

Even though banks keep accurate records and provide internal control support for cash transactions, it is essential for businesses to reconcile their checking accounts regularly. Reconciliation helps in identifying any discrepancies, errors, or fraudulent activities, and ensures the accuracy of the business's financial statements.

Question 6

The petty cash fund should be reimbursed when it is nearing zero and at the end of the accounting period when financial statements are prepared.

Accepted Answer

Petty cash fund should be replenished when it is running low or nearing zero and at the end of the accounting period to ensure accurate financial statements.

Question 7

The steps to reconcile the balance of the bank statement to the adjusted balance include adding outstanding checks,deposits,and bank service charges.

Accepted Answer

To reconcile the balance of the bank statement to the adjusted balance, you subtract outstanding checks and add deposits in transit. Bank service charges are subtracted from the company's book balance, not added to the bank statement balance.

Question 8

The voucher register is a journal that is used to record all approved vouchers within the company.

Accepted Answer

The voucher register serves as a record of all the vouchers that have been approved within the company.

Question 9

All disbursements from petty cash should be documented by a petty cash receipt.

Accepted Answer

Petty cash receipts provide a record of all disbursements made from the petty cash fund, making it easier to track and account for the money spent.

Question 10

Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

Accepted Answer

Outstanding checks are checks that have been written by the customer but have not yet been paid by the bank. Therefore, they have not been deducted from the customer's account yet.

Question 11

The purposes and principles of internal control are fundamentally the same across the globe.However,cultural differences sometimes suggest different emphasis on the mix of control procedures.

Accepted Answer

While the purposes and principles of internal control are generally universal, cultural differences can affect the specific control procedures that are emphasized or implemented.

Question 12

When merchandise is needed,a department manager must inform the purchasing department of this need by preparing and signing a purchase requisition,which lists the merchandise needed and requests that it be purchased.

Accepted Answer

This statement is true.

Question 13

The entry to increase the balance in petty cash from $50 to $75 would be to credit the Petty Cash account in the amount of $25.

Accepted Answer

To increase the balance in the Petty Cash account, you would debit the Petty Cash account by $25, not credit it.

Question 14

A bank reconciliation usually yields both an adjusted bank balance and an adjusted book balance.

Accepted Answer

A bank reconciliation involves comparing the bank statement to the company's books and making any necessary adjustments to both the bank balance and book balance to ensure they match. Therefore, the end result should be an adjusted bank balance and an adjusted book balance.

Question 15

Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

Accepted Answer

Deposits in transit are deposits that have been made by the depositor but have not yet been recorded on the bank statement. Therefore, they will not appear on the bank statement until a later date.

Question 16

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.

Accepted Answer

This statement is true. A bank reconciliation is a process that helps to identify and explain any discrepancies that exist between the balance of a checking account on the depositor's records and the balance reported on the bank statement. This is an important task that helps to ensure the accuracy of a company's financial records and prevent fraud or errors.

Question 17

After preparing a bank reconciliation,adjustments must be made for items reconciling the bank balance and items reconciling the book balance.

Accepted Answer

Adjustments are only made to the company's book balance after a bank reconciliation; the bank balance is not adjusted by the company because it reflects the bank's records, not the company's internal records.

Question 18

Assume that at the end of the day,the cash register tape shows a balance of $635.However,the cash drawer has a balance of $650.This difference should be debited to Miscellaneous Expense.

Accepted Answer

The difference should be credited to Cash Over and Short account, not debited to Miscellaneous Expense.

Question 19

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

Accepted Answer

The Petty Cash account is not necessarily a separate checking account, but rather a fund of cash used for small expenses in the business. It is typically kept in a secure location and replenished as needed.

Question 20

The journal entry for petty cash reimbursement involves a debit to the appropriate expenses and a credit to Petty Cash.

Accepted Answer

The journal entry for petty cash reimbursement involves a debit to the appropriate expenses and a credit to Cash (not Petty Cash), as the Petty Cash account was initially funded from the main Cash account and is being replenished.

Quiz 6: Reporting and Analyzing Cash and Internal Controls