Question 1

For good controls over cash payments,the company officer approving a payment voucher should be the same as the person who ordered the goods,to ensure that the correct amount of cash is paid.

Accepted Answer

The answer of For good controls over cash payments,the company...

Question 2

Which of the following statements describes a receiving report?

Accepted Answer

A receiving report is a document that confirms that the goods ordered have been received and are in good condition. It is typically prepared by the receiving department and used to reconcile the purchase order against the actual goods received. The purpose of the receiving report is to ensure that the goods received are consistent with the goods ordered, and to identify any discrepancies or damage.

Question 3

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. This document outlines the details of what is being ordered, the quantity, the price, and any other required information. Once the supplier receives the purchase order, they can begin the process of fulfilling the order and shipping the goods to the purchaser.

Question 4

Before signing a check,the controller or the treasurer should examine the purchase order,the invoice,and the receiving report to determine that the company received the goods and that the company is paying only for the goods received.

Accepted Answer

This statement is true as it highlights the standard control procedures to ensure that the company pays only for the goods or services it has acquired. The purchase order, invoice, and receiving report are compared to ascertain if the goods have been received and the prices and quantities are in agreement. This process helps prevent fraudulent activities such as paying for goods that were never delivered or overpaying for goods received.

Question 5

In a good internal control system,which of the following sets of documents is required for proper approval of a payment to a supplier?

Accepted Answer

A receiving report is necessary to confirm that the goods have been received and are acceptable. An invoice is necessary to document the amount owed and the terms of payment. A purchase order is necessary to authorize the purchase and ensure that the goods are being purchased at the agreed upon price and quantity. Together, these three documents provide a strong internal control system for approval of a payment to a supplier.

Question 6

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

Accepted Answer

Petty cash is a fund containing a small amount of cash that is used to pay for minor expenditures such as office supplies or small maintenance costs.

Question 7

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

Accepted Answer

This is a correct statement. When opening a new petty cash fund, you need to debit the Petty Cash account to increase the balance of the fund, and credit the Cash account to show that you are taking the money from the main cash account and putting it into the petty cash fund.

Question 8

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

Accepted Answer

The process described is Electronic Data Interchange (EDI), which replaces paper documents with electronic documents exchanged between computers of retailers and suppliers to automate business transactions. Real Time Gross Settlement (RTGS), Electronic Fund Transfer (EFT), and Evaluated Receipts Settlement (ERS) are also electronic payment systems but do not involve the direct communication and automation of business transactions between retailers and suppliers.

Question 9

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

Accepted Answer

The statement is false. Having several persons as custodians at one time can actually lead to confusion and a lack of accountability. It is best practice to have one designated custodian who is responsible for managing and monitoring the petty cash fund.

Question 10

Which is the most liquid form of asset?

Accepted Answer

Cash is the most liquid form of asset as it can be easily converted into any other asset or used for immediate payment of liabilities. Accounts receivable may take some time to be collected, inventory may take even longer to be sold, and supplies may not have much demand in the market.

Question 11

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer.
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Baker Auto Supply purchases merchandise inventory from A & B Company.The accountant places the order,verifies receipt of the merchandise,and records the transaction in the general journal.

Accepted Answer

The answer of For the following situation,state whether it represents...

Question 12

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

Accepted Answer

Matching the receiving report with the supplier invoice helps ensure that the products or services were received as agreed and that the supplier is billing the correct amount. This helps prevent errors and fraud, and ensures that the payment is legitimate.

Question 13

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

Accepted Answer

An invoice from a supplier is a statement from the supplier showing the goods purchased and the amount due. It is not an order, report, or document authorizing a payment.

Question 14

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 separation of duties helps to prevent fraudulent or improper payments from being made. By having different individuals responsible for ordering goods and approving payments, it is less likely that one person will be able to manipulate the process for personal gain.

Question 15

A company check for payment must be signed by ________.

Accepted Answer

A company check for payment must be signed by an employee specifically authorized by the company. This person is usually the individual responsible for managing the company's finances or a designated signatory approved by the board of directors. It is not appropriate for just any employee to sign the company check.

Question 16

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 17

Which of the following statements describes a purchase order?

Accepted Answer

A purchase order is a document that a buyer sends to a supplier to request goods or services. It outlines the items, quantity, and agreed-upon price for the purchase.

Question 18

Which of the following items must be examined by the controller or treasurer before signing a check?

Accepted Answer

The treasurer or controller should examine the purchase order before signing a check to ensure that the goods or services were actually ordered and received. The ledger, confirmation report, and journal entry may provide additional information, but they do not necessarily provide confirmation of the validity of the purchase.

Question 19

For the following situation,state whether it represents a strength or weakness in internal control and give the reason for your answer.
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The mailroom employee opens all incoming mail.Customers' checks are sent to the treasurer,and remittance advices are sent to the accounting department.The controller compares the daily bank deposit amount from the treasurer and the daily debit to cash from the accounting department.

Accepted Answer

The answer of For the following situation,state whether it represents...

Question 20

Evaluated Receipts Settlement is ________.

Accepted Answer

Evaluated Receipts Settlement is a process that streamlines the payment approval process into a single step by comparing the receiving report to the purchase order. This eliminates the need for separate approvals and reduces paperwork. However, proper segregation of duties should still be observed. Option A and D are not relevant to the definition of Evaluated Receipts Settlement. Option B is incorrect as separation of duties is still necessary to ensure internal control.

Quiz 7: Internal Control and Cash

For good controls over cash payments,the company officer approving a payment voucher should be the same as the person who ordered the goods,to ensure that the correct amount of cash is paid.

Which of the following statements describes a receiving report?

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

Before signing a check,the controller or the treasurer should examine the purchase order,the invoice,and the receiving report to determine that the company received the goods and that the company is paying only for the goods received.

In a good internal control system,which of the following sets of documents is required for proper approval of a payment to a supplier?

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

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

A streamlined process that bypasses paper documents altogether and in which computers of retailers communicate directly with the computers of suppliers to automate routine business transactions is known as ________.

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

Which is the most liquid form of asset?

A receiving report should be matched with the supplier invoice before a payment to the supplier is approved.

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.

A company check for payment must be signed by ________.

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

Which of the following statements describes a purchase order?

Which of the following items must be examined by the controller or treasurer before signing a check?

Evaluated Receipts Settlement is ________.