Question 1

Describe a petty cash account and its purpose.

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Question 2

On March 1, a company established a $75 petty cash fund. On March 12, the petty cash fund contains $3 in cash and the following paid petty cash receipts: transportation-in on merchandise inventory $14.25; postage, $19.50; and office supplies, $36. Give the general journal entry to reimburse the fund and to increase its amount to $150 on March 12.

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Question 3

A company reported net sales for 2014 of $265,000 and $545,000 for 2015. The year-end balances of accounts receivable were $39,000 for 2014 and $92,000 for 2015. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

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Question 4

Plenty Co. established a petty cash fund of $150 on October 1. On October 10, the petty cash fund was replenished when there was $49 remaining and there were petty cash receipts for: office supplies, $47; transportation-in on inventory purchased, $32; and postage, $22. On October 15, the petty cash fund was decreased to $125 in total. Plenty Co. uses the perpetual inventory system. Record the above transactions in general journal form.

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Question 5

Describe a bank reconciliation and discuss its purpose.

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Question 6

Quibble Company established a $300 petty cash fund by issuing a check to the custodian on February 1. On February 15, the petty cash fund was replenished and increased to $800 in total. The contents of the petty cash fund at the time of the February 15 replenishment were:
 $$\begin{array} { | l | r | r | } 
\hline \begin{array} { l } 
\text { Currency and } \
\text { coins }
\end{array} & & \$ 12 \
\hline \begin{array} { l } 
\text { Petty cash } \
\text { receipts for: }
\end{array} & & \
\hline \begin{array} { l } 
\text { Transportation- } \
\text { in for inventory }
\end{array} & \$ 39 & \
\hline \text { Delivery expense } & 88 & \
\hline \begin{array} { l } 
\text { Repairs to office } \
\text { equipment }
\end{array} & 47 & \
\hline \text { Postage } & 64 & \
\hline \begin{array} { l } 
\text { Entertainment of } \
\text { customers }
\end{array} & 53 & 291 \
\hline \text { Total } & & \$ 303 \
\hline
\end{array}$$ 
The company uses the perpetual inventory method. Prepare Quibble's general journal entry to
record both the reimbursement and the increase of the petty fund on February 15.

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Question 7

A petty cash fund was originally established with a check for $100. On August 31, which is the period end, the petty cash fund included the following:
 $$\begin{array} { | l | r | } 
\hline \text { Petty cash rec eipts: } & \
\hline \text { Postage } & \$ 43.50 \
\hline \text { Office supplies } & 11.85 \
\hline \text { Office equipment repair } & 39.00 \
\hline \text { Cash } & 4.25 \
\hline
\end{array}$$ 
Prepare the general journal entry to record the replenishment of the petty cash fund on August 31.

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Question 8

The treasurer of a company is responsible for cash management. List five cash management principles that are essential for effective cash management.

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Question 9

For each of the independent cases below, identify the principle of internal control that is violated, and recommend what should be done to remedy the violation.
1. In order to save money, Indigo Company has decided to drop its property insurance on assets; and stop bonding the cashiers who handle upwards of $5,000 in cash each day.
2. Jobs Company records each sale on a preprinted invoice. Because invoices are sometimes damaged in the process of preparation, the invoices are not prenumbered. Instead, the sales clerk writes the next number on each invoice as it is prepared.
3. Keegan Company is a very small business. Dylan Epps, one of the two office clerks, opens the mail each day and removes the cash receipts that come in the mail. Dylan also records the receipts in the cash records and the customer's account and deposits the cash in the bank.
4. Ludwig Company prides itself on hiring only the most competent employees. The owner, Jeremy Ludwig, believes that since the employees are highly competent he can show he trusts them completely by not checking up on their performance.
5. Maple Industries is a small business with three accounting employees. Each employee is well-trained and able to perform any of the accounting tasks, including handling cash receipts and cash disbursements, and preparing the bank reconciliation. Because of this cross-training, the employees share responsibilities for all of the tasks.

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Question 10

On June 1, a company established a $75 petty cash fund. On June 27, the petty cash fund contains
$5.25 in cash and the following paid petty cash receipts: postage, $19.50; office supplies, $36.25; and miscellaneous expense $14.00. Give the general journal entry to reimburse the fund on June 27.

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The answer of On June 1, a company established a...

Question 11

Norman Co. had $5,925 million in sales and $1,155 million in ending accounts receivable for the current period. For the same period, Opal Co. reported $5,885 million in sales and $790 million in ending accounts receivable. Calculate the days' sales uncollected for both companies as of the end of the current period and indicate which company is doing a better job in managing the collection of its receivables.

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Question 12

When using a voucher system, what are the steps on the invoice approval checklist that must be completed before an invoice approval is complete and a voucher prepared?

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Question 13

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are the specific requirements for auditors set forth by SOX?

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Question 14

At the end of the current period, a company reported $725,000 in net credit sales and $100,000 in ending accounts receivable. Calculate this company's days' sales uncollected at the end of the current period.

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Question 15

At the end of the day on March 15, the cash register's record shows $1,957, but the count of cash in the register is $1,965. Prepare the general journal entry to record the day's cash sales.

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Question 16

Match between columns
                        Premises: A company manager keeps pre-signed checks in his desk drawer for employees to hand write when the accountant is out of the office.
A company fails to hire a CPA to perform an annual audit.
Only sales clerks use the cash registered, but they all share the same cash drawer.
The bookkeeper prepares and signs checks and completes the bank reconciliation.
A large company has no internal auditor on staff.
A company uses a voucher system, but the cash disbursement clerk pays directly from invoices received.
A restaurant allows servers to keep cash collected in their aprons and ring in all sales at the end of the night.
A company does not bond its key cash-handling employees.
A company has a single department that handles purchasing, receiving, and inventory management.
Cashiers have access to the cash register recorded tape or file.

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Quiz 8: Cash and Internal Controls