Deck 10: Cash Management and Internal Control

Question 1

How many of these are features of good internal control of cash payments?
1. separation of record-keeping and the authority to sign cheques
2. the use of pre-numbered cheques
3. preparing regular bank reconciliation statements
4. one person having responsibility for all aspects of a cash payment

A)One
B)Two
C)Three
D)Four

Answer 1

Three

Question 2

Which of these is not a principle of internal control?

A)Separation of record keeping and custody of assets
B)Division of responsibility for related transactions
C)Appointing an external auditor
D)Placing excess cash on fixed deposit to earn interest

Answer 2

D

Question 3

The deposit column of Jeremy Company's bank statement shows a direct credit of $1,000.Assuming the account is not in overdraft,when reconciling the bank account,this amount will be:

A)Deducted from the bank statement balance in the reconciliation
B)Added to the bank statement balance in the reconciliation
C)Deducted from the general ledger bank balance
D)Added to the general ledger bank balance

Answer 3

D

Question 4

When reconciling the ledger with the bank statement assuming a positive bank balance)a returned dishonoured)cheque should be:

A)Added to the bank statement balance in the reconciliation
B)Subtracted from the general ledger bank balance
C)Subtracted from the bank statement balance
D)Added to the general ledger bank balance

Question 5

While preparing the bank reconciliation Sara discovered that the bank had incorrectly paid one cheque for a larger amount than was written by the company bank error).The bank account has a positive balance.The proper procedure is to:

A)Add the error to the bank balance in the general ledger
B)Deduct the error from the bank balance in the general ledger and notify the bank
C)Add the error to the bank statement balance in the reconciliation and notify the bank
D)Deduct the error from the bank statement balance in the reconciliation

Question 6

The Cash Short and Over ledger account,which records the difference between the total of the cash register tape and the actual cash counted from the register,is:

A)Closed to the Profit and Loss Summary account
B)Included in the bank reconciliation
C)Deducted from the Bank account balance in the ledger
D)Appears on the Balance Sheet as liability

Question 7

When reconciling a bank account with a positive balance,bank fees and interest charged by the bank are:

A)Added to the bank statement balance in the reconciliation
B)Deducted from the bank statement balance in the reconciliation
C)Deducted from the general ledger bank balance
D)Added to the general ledger bank balance

Question 8

Which of these is not an essential feature of the imprest petty cash system?

A)Deciding on a fixed sum that becomes the imprest amount or 'float'
B)Several people being authorised to reimburse expenses
C)Cash in the fund together with vouchers always equalling the imprest amount
D)Replenishment of the fund for the exact amount spent in the period

Question 9

Which of these does not represent proper internal control of cash receipts?

A)Daily banking of receipts
B)Two people opening the mail
C)Paying accounts directly out of the cash register
D)Balancing the cash register after each employees' shift

Question 10

The bank statement of a business shows an overdraft of $10 000 at 31 March.In reconciling the account at that date indicate the treatment you would give to Cheque No.461 for $30 that was drawn on 25 March but had not yet been presented for payment.

A)Record in the cash receipts journal
B)Record in the cash payments journal
C)Add to the bank statement balance in the bank reconciliation
D)Subtract from the bank statement balance in the bank reconciliation

Question 11

Which statement relating to dishonoured cheques is true?

A)They are cheques from debtors deposited into the firm's bank account but not paid by the drawer's bank due to lack of funds or for other reasons
B)They can be adjusted for by making a negative entry in the sales journal
C)They must be listed in the bank reconciliation
D)They appear as credits on the bank statement

Question 12

Assuming the account is not in overdraft,when reconciling the ledger with the bank statement a deposit in transit should be:

A)Subtracted from the general ledger bank balance
B)Added to the general ledger bank balance
C)Subtracted form the bank statement balance in the reconciliation
D)Added to the bank statement balance in the reconciliation

Question 13

The cornerstone of the internal control of cash is:

A)The bank reconciliation
B)A strong safe
C)A petty cash system
D)The double entry accounting system

Question 14

The municipality of Stonybank had an unadjusted ledger bank balance at 31 March of $28 000 Dr.The bank statement for the month shows a balance of $16 300 Cr.It also shows bank charges of $255 and dividends directly paid into the bank of $500.Deposits not yet credited are $14 545 and unpresented cheques are
$2 600.What is the cash at bank ledger balance at 31 March?

A)$28 245
B)$40 190
C)$39 945
D)$23 045

Question 15

Storyboard Ltd had an unadjusted bank account ledger balance at 31 May of $800 Dr.The bank statement at the same date showed a balance of $1090 Cr.Bank service charges for the month were $10 and outstanding cheques totalled $400.The bank statement revealed that the bank had collected dividends for the firm of $50 and a deposit of $150 is not yet recorded on the statement.What is the corrected bank account ledger balance at 31 May?

A)$440
B)$840
C)$990
D)$1090

Question 16

The municipality of Greenvale received its monthly bank statement showing a balance of $27,629 Cr at 31 January.On this date cash received from ratepayers and not yet deposited at the bank totalled $857 and outstanding cheques were $4,321.The amount to appear as cash at bank on the 31 January balance sheet is:

A)$22,451
B)$28,486
C)$31,093
D)$24,165

Question 17

Kathryn's account is not in overdraft.When preparing the bank reconciliation she found that the bank had incorrectly debited her account with $120.The proper procedure is to:

A)Deduct $120 from the bank balance in the general ledger and notify the bank
B)Deduct $120 from the bank balance in the general ledger
C)Add $120 to the bank statement balance in the bank reconciliation and notify the bank
D)Do nothing as the bank will adjust the error when it balances.

Question 18

If the petty cash fund was not reimbursed at the time the financial statements were prepared:

A)Expenses would be understated and equity overstated
B)Petty cash asset would be overstated and expenses understated
C)Petty cash expenses would be overstated and bank would be understated
D)Expenses would be overstated and petty cash asset would be understated

Question 19

The 30 April bank reconciliation of M Co was prepared using the information below:
Outstanding deposit $1 000
Ledger bank balance $2 700 Dr adjusted
Unpresented cheques $620
What was the bank statement balance at 30 April?

A)$3 080 Dr
B)$2 320 Cr
C)$4 320 Cr
D)$2 320 Dr

Question 20

Which of these is not a good internal control practice?

A)The use of the periodic inventory system for stock control
B)The use of passwords for computer access
C)The pre-numbering of documents
D)Taking out a trial balance

Question 21

Which of these is not a broad principle of cash management that helps ensure that a business remains solvent?

A)Collect cash owing from accounts receivable as quickly as possible
B)Pay accounts payable just before the due date rather than when the statement is first received
C)Buy all capital equipment on hire purchase
D)Invest any cash that is surplus to requirements to earn a return for the business

Question 22

The petty cash account is what type of account?

A)Asset
B)Expense
C)Income
D)Liability

Question 23

The entry at the end of the month to reimburse the petty cash for the amount spent is:

A)Debit petty cash expenses; credit bank
B)Debit petty cash asset; credit petty cash expenses
C)Debit petty cash asset; credit bank
D)Debit bank; credit petty cash asset

Question 24

The _________ __________ fund is used to make cash payments for minor expenditures such as postage stamps,coffee and fares.

Question 25

Cheques banked but unpaid because of lack of funds in the drawer's account are called d__________________ cheques.

Question 26

Which of these is not an advantage of cash budgeting?

A)It helps to maintain the credit standing of the business
B)It encourages careful assessment of all proposed expenditures
C)It keeps to a minimum idle cash funds
D)It increases sales

Question 27

Which of these principles of cash managements is untrue?

A)There are disadvantages for a business in holding very low levels of inventory
B)The longer the operating cycle the longer it takes to pay creditors
C)It is generally a mistake to delay paying creditors if it means discounts on offer are lost
D)Generally cash surplus to requirements should be used to acquire necessary non-current assets rather than being kept on fixed deposit.

Question 28

Which of these is not included in the definition of cash?

A)Bills receivable
B)EFTPOS transactions
C)Petty cash
D)Cheque

Question 29

A deposit entered in the firm's books but not yet recorded on the bank statement is referred to as an o______________ deposit.

Question 30

The statement listing the differences between the ledger bank balance and the balance on the bank statement is called the b_______ r__________________ statement.

Question 31

If the cash register tape at the end of the shift shows that the total sales recorded are $1,499 but the cash in the register is $1,425 the Cash Short and Over account is debited/credited with the difference of $74.

Question 32

Chong Inc makes all of its purchases on credit; 50% are paid in the month of purchase; 30% during the month following the purchase and 20% in the second month following the purchase.Given the following data,determine the cash paid to creditors during month three.

Question 33

When preparing the bank reconciliation,where the bank is not in overdraft,unpresented cheques are deducted/added)_____________ from/to)______ the bank statement credit balance.

Question 34

Malaysian Carpets makes all sales on credit,with 60% of the payment received in the month of sale and 40% in the month following sale.Budgeted sales are $$\begin{array} { l l } \text { February } & \$ 100000 \\\text { March } & \$ 120000\end{array}$$ What is the estimated amount received from debtors in March?

A)$220 000
B)$120 000
C)$112 000
D)$108 000

Question 35

The statement relating to a cash budget that is true is:

A)It is a statement of expected income and expenses
B)Non-cash items such as depreciation are included
C)It is usually prepared on a weekly basis
D)The shorter the time period involved the easier it is to predict future cash flows

Question 36

The ratio that measures solvency by relating cash flows from operating activities to total liabilities is the:

A)gearing ratio
B)short-term cash flow adequacy ratio
C)cash flow adequacy ratio
D)turnover of cash flow ratio

Question 37

Becker Carpets makes all sales on credit with 50% of the payment being received in the month of sale,40% in the month following sale and the remaining 10% in the subsequent month.

Question 38

The ability of a firm to pay its debts as they fall due is known as:

A)cash management
B)being in surplus
C)solvency
D)the acid test

Question 39

A cash budget measures?

A)Estimated liquidity
B)Estimated profitability
C)Estimated working capital
D)Estimated financial position

Question 40

Becker Carpets makes all sales on credit with 50% of the payment received in the month of sale,40% in the month following the sale and the remaining 10% in the subsequent month.

Question 41

The entry to replenish the petty cash fund at the end of the period is to debit/credit)_________ each of the various expense accounts and to debit/credit)_________ the bank account.

Question 42

A petty cash system where the cash in the fund,together with vouchers for the amounts spent always equals the 'float',is known as the ____________ system.

Question 43

The ability of an entity to pay its debts as and when they fall due is known as s________________.

Question 44

A c____________ b_____________ is a report which projects future cash receipts and payments over time.