Question 1

The number of days' sales uncollected:

Accepted Answer

The number of days' sales uncollected is used to evaluate the liquidity of receivables. It measures the average number of days it takes a company to collect its accounts receivable. This is important in analyzing a company's ability to meet its short-term obligations.

Question 2

The days' sales uncollected ratio is used to:

Accepted Answer

The days' sales uncollected ratio is used to estimate how much time is likely to pass before the current amount of accounts receivable is received in cash. It is also known as the average collection period and helps in assessing the efficiency of a company's credit and collection process. Option A is incorrect because it is not related to the purpose of this ratio. Option B is incorrect because it measures the number of days passed without collecting on accounts receivable, which is different from the purpose of this ratio. Option C is incorrect because the likelihood of collecting sales on account is not directly related to this ratio. Option E is incorrect because this ratio does not measure cash sales.

Question 3

A company had net sales of $21,500 and ending accounts receivable of $2,700 for the current period.Its days' sales uncollected equals:

Accepted Answer

The answer of A company had net sales of $21,500...

Question 4

The number of days' sales uncollected is calculated by:

Accepted Answer

Days' sales uncollected is a measure of the average number of days it takes to collect accounts receivable. It is calculated by dividing accounts receivable by net sales and multiplying the result by 365. This calculation gives an estimate of how long it takes for a business to receive payment from its customers. Option A and C are not correct as they don't include the time period. Option D and E are incorrect as they use the wrong formula.

Question 5

At the end of the day,the cash register's record shows $1,050,but the count of cash in the cash register is $1,055.The correct entry to record the cash sales is

Accepted Answer

The count of cash in the cash register is higher than the register's record, indicating a cash overage of $5. This should be recorded by debiting Cash $1,055 and crediting Cash Over and Short $5. The sales should be recorded by crediting Sales for the register's recorded amount of $1,050. Therefore, the correct entry is Debit Cash $1,055;credit Cash Over and Short $5;credit Sales $1,050.

Question 6

Freeman Co.had net sales of $4.2 million and ending accounts receivable of $0.8 million.Its days' sales uncollected equals:

Accepted Answer

Days' sales uncollected is calculated as (Ending Accounts Receivable / Net Sales) * 365. For Freeman Co., it is ($0.8 million / $4.2 million) * 365 = 69.5 days.

Question 7

A bank does not issue a debit memorandum to notify the depositor of which of the following?

Accepted Answer

A debit memorandum is used to notify the depositor of a decrease in their account balance, typically due to a fee, withdrawal, or check that was not honored. A deposit to their account would not result in a decrease, so a debit memorandum would not be issued.

Question 8

A remittance advice is a(n):

Accepted Answer

A remittance advice is a document sent by a customer to a supplier to inform them that a payment has been made, typically explaining the details of the payment by check.

Question 9

A set of procedures and approvals for verifying,approving and recording obligations for eventual cash disbursement,and for issuing checks for payment only of verified,approved,and recorded obligations is referred to as a(n):

Accepted Answer

A voucher system is a set of procedures and approvals for verifying, approving and recording obligations for eventual cash disbursement, and for issuing checks for payment only of verified, approved, and recorded obligations. It ensures proper controls and reduces the risk of fraud and errors in the disbursement process. The other options either do not specifically mention the procedures and approvals for verifying and recording obligations, or are too broad to be specific to the disbursement process.

Question 10

All of the following are true of the number of days' sales uncollected ratio except:

Accepted Answer

The number of days' sales uncollected ratio is most effective in evaluating the credit sales of a company, not cash sales. This ratio reflects the average number of days that a company takes to collect its accounts receivable, and measures the liquidity of receivables by showing how long it takes for a company to convert its receivables into cash. It can be used for comparisons to other companies in the same industry or between current and prior periods, and measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

Question 11

The following information is taken from Reagan Company's December 31 balance sheet:  If net credit sales for the current year were $612,000,the firm's days' sales uncollected for the year is:

Accepted Answer

The answer of The following information is taken from Reagan...

Question 12

At the end of the day,the cash register tape shows $1,020 in cash sales but the count of cash in the register is $1,035.The proper entry to account for this excess is:

Accepted Answer

This entry recognizes the $1,020 in sales that were actually recorded, but also accounts for the $15 in excess cash. The overage is recorded as "Cash Over and Short" which is a separate account used to track discrepancies between the cash count and the sales records.

Question 13

The Cash Over and Short account:

Accepted Answer

The Cash Over and Short account is used to record the income effects of errors in making change and/or processing petty cash transactions. For example, if an employee accidentally gives a customer too much change, the excess amount would be recorded in this account as a debit. If the employee gives too little change, the shortfall would be recorded in this account as a credit. This account is important for accurately tracking cash transactions and detecting errors. It may still be used in a computerized accounting system. The account can have either a debit or a credit balance, depending on the circumstances.

Question 14

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

Accepted Answer

The account titled Cash Over and Short is used to record any cash shortages or overages that may have occurred during petty cash transactions or errors in making change. This account helps in reconciling any discrepancies between the actual amount of cash on hand and the recorded amount.

Question 15

A voucher is an internal document or file:

Accepted Answer

A voucher is used to accumulate information needed to control cash disbursements and ensure proper recording of transactions. It is not prepared after an invoice, used as a substitute for an invoice, a replacement for a bank check, or prepared before ordering goods from an approved vendor list.

Question 16

A bank statement provided by the bank includes:

Accepted Answer

A bank statement includes the beginning and ending balance of the depositor's account, as well as transactions that have cleared during the statement period. It does not include a list of outstanding checks or deposits in transit, which the depositor must reconcile themselves. Petty cash amounts are typically handled separately from a bank account and would not be included on a bank statement. A reconciliation to the depositor's cash account is something that the depositor would prepare themselves in order to ensure that their records match the bank's records.

Question 17

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

Accepted Answer

Option C weakens control over cash receipts that arrive through the mail because only one person handles and processes the cash, making it easier for the person to steal the cash. Options A, B, D, and E all strengthen control over cash receipts by creating a paper trail, separating duties, recording transactions, and ensuring employees are bonded.

Question 18

Preparing a bank reconciliation on a monthly basis is an example of:

Accepted Answer

Preparing a monthly bank reconciliation helps to ensure the accuracy of cash records and protect the company's assets, as any discrepancies can be identified and investigated. It is a control activity within the internal control framework. Establishing responsibility, separation of duties, and technology controls are also part of the internal control system, but they are not exemplified by the preparation of a bank reconciliation. Poor internal control would be indicated if a bank reconciliation were not being performed regularly.

Question 19

The voucher system of control:

Accepted Answer

The voucher system of control establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement. This system is used to ensure that payments are made for legitimate purchases and that all necessary approvals have been obtained. It is not limited to multiple purchases from the same supplier and can be beneficial for companies of all sizes.

Question 20

Internal control procedures for cash receipts do not require that:

Accepted Answer

While it is good practice to receive all collections for sales immediately, it is not a requirement for internal control procedures for cash receipts. However, all other options listed (A, C, D, and E) are necessary for effective internal control procedures for cash receipts. Custody over cash should be kept separate from its recordkeeping (A), clerks having access to cash in a cash register should not have access to the register tape or file (C), an employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier (D), and cash sales should be recorded on a cash register at the time of each sale (E).

Quiz 8: Cash and Internal Controls