Question 1

The use of automatic pre-authorized monthly bill payment

Accepted Answer

Automatic pre-authorized monthly bill payments are indeed a form of electronic funds transfer (EFT), which allows for the electronic movement of money from one account to another without the need for physical checks or cash transactions.

Question 2

The retailer considers VISA and MasterCard sales as

Accepted Answer

Retailers consider VISA and MasterCard sales as cash sales because the funds are typically deposited into the retailer's account by the card issuer within a few days, similar to cash transactions.

Question 3

All of the following parties are involved when bank credit cards are used to make a retail sale EXCEPT

Accepted Answer

The customer's bank is not directly involved in a transaction when bank credit cards are used; the bank credit card company handles the transaction between the retailer and the customer.

Question 4

The daily cash count of cash register receipts made by department supervisors is an example of

Accepted Answer

The daily cash count of cash register receipts made by department supervisors is an example of an internal independent check of performance. This process involves verifying the accuracy and integrity of transactions or performance by an independent party within the organization, which helps in ensuring the reliability of financial reporting and preventing errors or fraud.

Question 5

An employee authorized to sign cheques should NOT record

Accepted Answer

An employee authorized to sign cheques should not record cash payment transactions to maintain separation of duties and reduce the risk of fraud. This principle ensures that no single individual has control over all aspects of a financial transaction, thereby increasing checks and balances within the organization.

Question 6

A debit balance in Cash Over and Short is reported as a

Accepted Answer

A debit balance in Cash Over and Short represents a shortfall in cash, which is considered a loss or expense. Therefore, it is reported as a miscellaneous expense in the income statement.

Question 7

Choose the statement which is MOST INCORRECT. Cheques received through the mail should

Accepted Answer

Cheques should not be "rung up" on a cash register immediately. They should be deposited at the bank as soon as possible.

Question 8

Clearing is the process whereby

Accepted Answer

Clearing refers to the process where a cheque or deposit is accepted and processed by the maker's bank, ensuring the funds are transferred from one account to another.

Question 9

Jian Hua Dong filled up her vehicle using her debit card. The cost of the fill up was $50. Each time a customer uses a debit card Petro Canada is charged a transaction fee of $0.50. The entry to record the transaction by Petro Canada is

Accepted Answer

The answer of Jian Hua Dong filled up her vehicle...

Question 10

Brown's Convenience is open 7 days a week. The cash receipts from Saturday and Sunday are kept in an envelope in a back storage room and are deposited each Monday morning. This process violates which internal control activity?

Accepted Answer

Keeping cash receipts in an envelope in a back storage room over the weekend does not adequately protect the assets from theft or misplacement, violating the principle of safeguarding assets and records.

Question 11

Sales using a retailer's own credit card are considered to be

Accepted Answer

Sales made using a retailer's own credit card are considered accounts receivable because the retailer is extending credit to the customer, expecting payment at a later date.

Question 12

Control over cash payments is generally more effective when

Accepted Answer

Payments made by cheque provide a record of the transaction, making it easier to track and control cash payments. This method enhances accountability and reduces the risk of unauthorized transactions.

Question 13

When customers make purchases with a bank credit card, the retailer

Accepted Answer

Retailers are not involved in the collection process when customers use bank credit cards; this responsibility falls to the bank or credit card company.

Question 14

Which of the following has the greatest internal control?

Accepted Answer

Payments made by Electronic Funds Transfer (EFT) have the greatest internal control due to the electronic tracking and authorization mechanisms inherent in EFT systems. These systems typically include audit trails, authentication, and encryption, making it easier to monitor and control transactions compared to the more manual and less secure processes associated with cash, cheques, and credit cards.

Question 15

Joe Sanji purchases books from Canada Books Co. for $1,000, using his Royal Bank Financial Group VISA card. The service fee the bank charges Canada Books is 3%. The entry made to record the transaction by Canada Books is

Accepted Answer

The answer of Joe Sanji purchases books from Canada Books...

Question 16

Which of the following transactions are NOT covered by the term "Electronic Funds Transfer"?

Accepted Answer

Electronic Funds Transfer (EFT) refers to the electronic exchange or transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems. Mail-in cheques do not fall under EFT because they involve a physical paper instrument and require manual processing, unlike the direct electronic movement of funds facilitated by options A, B, and D.

Question 17

Electronic Funds Transfers are used to

Accepted Answer

Electronic Funds Transfers (EFT) are used for various purposes including reducing the risk of lost or stolen checks, reducing the cost associated with making payments by check, and facilitating payroll payments to employees.

Question 18

Internal control over cash receipts will include all of the following EXCEPT

Accepted Answer

Having only one authorized person to both receive cash and record cash receipts contradicts the principle of segregation of duties, which is a key component of internal control systems. This principle aims to reduce the risk of errors or fraud by dividing responsibilities among different individuals.

Question 19

From an internal control standpoint, the asset most susceptible to improper diversion and use is

Accepted Answer

Cash is the most liquid asset and can be easily diverted or misused without leaving a trace, making it highly susceptible to improper diversion and use.

Question 20

Proper control for over-the-counter cash receipts includes

Accepted Answer

A cash register with totals visible to the customer allows for immediate verification of the transaction by the customer, enhancing transparency and reducing the risk of errors or dishonesty.

Quiz 7: Internal Control and Cash