Question 1

The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. (Choices may be used more than once.)
-Although department supervisors can request a preferred supplier or vendor, the purchasing department has the responsibility for making the final decisions on a vendor.

Accepted Answer

Having the purchasing department make the final decision on vendors helps prevent potential conflicts of interest and ensures that purchasing decisions are made based on the company's best interests, which adheres to sound internal control principles.

Question 2

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Interest earned on the checking account for May

Accepted Answer

The answer of The accountant for a local manufacturing company...

Question 3

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Segregation of duties

Accepted Answer

Segregation of duties is a key internal control that aims to reduce the risk of errors or fraud by dividing responsibilities among different individuals. In this context, separating the accounting and cash collection duties ensures that no single individual has control over all aspects of a financial transaction, thereby reducing the risk of misappropriation of assets or financial misstatement.

Question 4

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Clearly defined authority and responsibility

Accepted Answer

Clearly defined authority and responsibility align with specific approval given by management for the performance of activities, as it involves delineating who has the authority to make decisions and take actions within an organization.

Question 5

Explain how checking accounts, bank statements, and a bank reconciliation are used to help a company control its cash.

Accepted Answer

The answer of Explain how checking accounts, bank statements, and...

Question 6

Why is cash management necessary?

Accepted Answer

The answer of Why is cash management necessary?...

Question 7

Explain how a company can control small cash payments that are made in cash rather than by check.

Accepted Answer

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Question 8

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Adequate documents and records

Accepted Answer

Adequate documents and records are best matched with ensuring that the initial entry into the accounting system is from a consistent source with complete information, which ensures accuracy and completeness in record-keeping.

Question 9

You are an entrepreneur about to open a coffee and internet cafe near your college campus. You have decided to accept cash and credit and will use college student employees. While you plan to be at the shop during most hours that the business will be open, you have made one of the student employees your assistant manager to manage in your absence.
Describe at least five procedures that you might use to provide adequate internal control over cash and credit sales and bank deposits.

Accepted Answer

The answer of 
You are an entrepreneur about to open...

Question 10

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Customer's check was deposited on May 31 but is not included on the bank statement

Accepted Answer

This item represents a deposit in transit, which means it has been recorded by the company but not yet by the bank. Therefore, it would be an addition to the bank balance on the reconciliation to reflect the expected increase once the bank processes the deposit.

Question 11

You have just accepted a part-time job at one of the campus eateries. During your training the manager was called away to deal with some crisis and asked one of your co-workers to complete your training on using the cash register. The co-worker proceeds to tell you that if the money in the register drawer doesn't equal the total on the cash register tape, you will be responsible for the difference. If there is a cash shortage, you must make up the shortage out of your own pocket but if there is excess cash, you may keep the overage. Proudly, with the wink of an eye, she states, "I was short one time, right after I started working here. But I made sure, if you know what I mean, that I would never be short again."
A) Evaluate this control. Is it strong or weak? What kind of behavior will it encourage?
B) Do you have a professional obligation to report your co-worker to management? Explain.

Accepted Answer

The answer of 
You have just accepted a part-time job...

Question 12

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Bank service charge on the bank statement for new checks

Accepted Answer

Bank service charges on the bank statement for new checks are expenses that the company has incurred but may not have recorded in its books yet. Therefore, they are subtracted from the company's balance in the reconciliation process to reflect the decrease in the company's cash balance due to these charges.

Question 13

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Check written on the company's account in May and paid by the bank is returned with the bank statement

Accepted Answer

The check written and paid by the bank is already accounted for in the bank statement, so it does not need to be included in the reconciliation process.

Question 14

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Check written on the company's account in May that does not appear on the bank statement

Accepted Answer

A check written by the company that does not appear on the bank statement is considered an outstanding check and should be subtracted from the bank balance during reconciliation.

Question 15

Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.

Accepted Answer

The answer of Explain some internal control procedures that a...

Question 16

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Checks on recorded amounts

Accepted Answer

This action involves one employee or department verifying the work of another, which is a form of checks on recorded amounts.

Question 17

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.)
-Customer's NSF check returned with the bank statement

Accepted Answer

A customer's NSF (Non-Sufficient Funds) check returned with the bank statement would be a subtraction from the company balance because the company would have previously recorded this check as a deposit, increasing its book balance. When the check is returned NSF, the company needs to reverse this entry, decreasing its book balance.

Question 18

An effective system of internal control is critical to protecting a company's investment in cash. Identify the five control activities and provide one example that relates to each control as it would be applied to cash.

Accepted Answer

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Question 19

The following information is provided for a company that manufactures bicycles. The factory foreman determines when orders for materials are necessary. The orders are sent to the purchasing department that places orders with the vendors recommended by the factory foreman. When the materials are received, they are immediately delivered to a central storeroom. When invoices are received for the items purchased, they are sent to the accounting department for payment. The accounting department compares the invoices with purchase orders. If the two documents are in agreement, the invoice is approved for payment. The accounting department prepares checks that are signed by the company treasurer.
Recommend three or four improvements in the company's procedures for purchasing and paying for purchases of materials that will provide better internal control.

Accepted Answer

The answer of The following information is provided for a...

Question 20

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list.
-Safeguards over assets and records

Accepted Answer

Safeguards over assets and records are measures taken to protect the company's assets, including physical security and access controls. Storing blank checks in a locked location (D) directly relates to protecting assets from unauthorized access or theft, fitting the category of safeguards over assets and records.

Quiz 4: Internal Control And Cash

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.) -Interest earned on the checking account for May

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Segregation of duties

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Clearly defined authority and responsibility

Explain how checking accounts, bank statements, and a bank reconciliation are used to help a company control its cash.

Why is cash management necessary?

Explain how a company can control small cash payments that are made in cash rather than by check.

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Adequate documents and records

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.) -Bank service charge on the bank statement for new checks

Explain some internal control procedures that a fast food restaurant like McDonald's may use to control cash receipts.

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Checks on recorded amounts

The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be used more than once.) -Customer's NSF check returned with the bank statement

An effective system of internal control is critical to protecting a company's investment in cash. Identify the five control activities and provide one example that relates to each control as it would be applied to cash.

Choose the proper category of internal control activities that best matches the following actions. Each action should be matched with a different numbered item within the internal controls list. -Safeguards over assets and records