Question 1

Which of the following is/are true?

Accepted Answer

The primary internal control goal for cash receipts is to ensure that the business receives the appropriate amount of cash and safely deposits it in the bank. This ensures that cash is properly accounted for and reduces the risk of theft or loss. Option A is incorrect because the primary goal of internal controls for cash payments is to ensure that all transactions are authorized, valid, accurate, and recorded properly. Option C is incorrect because the operating cycle is a series of activities that a company undertakes to generate returns and cash flows, but not necessarily revenues specifically. Option D is incorrect because option A is incorrect.

Question 2

For each of the following events,match the event with the section of the bank reconciliation in which it is listed,if at all,and indicate the operation performed.
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { Section } & & \text { Operatiml } \
\hline B & \text { Bark Staternent } & \text { A } & \text { Addition to this section } \
\hline \mathrm { C } & \text { Comparyy's Books } & \text { D } & \text { Deduction from this section } \
\hline \mathbb { N } & \text { Neither } & \mathbb { N } & \text { No impact } \
\hline
\end{array}$$ $\begin{array}{|l|l|l|l|}
\hline & \text { Section } & \text { Operation } & \text { Event } \
\hline \text { 1. } & && \text { Your company enters an } \$ 18.67 \text { cheque as a } \$ 13.67 \text { cheque. } \
\hline \text { 3. } & & & \text { Your company has a deposit in transit. } \
\hline 4 . & & & \text { The bank pays interest on your account. } \
\hline 5 . & & & \text { Your company writes six cheques that clear the bank. } \
\hline 6 . && & \begin{array}{l}
\hline\text { Your company has written two cheques which have not cleared } \
\text { the bank. }
\end{array} \
\hline \text { 7. } && & \text { The bank charges your company } \$ 6 \text { in service fees. } \
\hline 8 . & & &\text { Your company failed to record a withdrawal from the account. } \
\hline 9 . & && \begin{array}{l}
\text { Your company makes three deposits that have all been } \
\text { recorded by the bank. }
\end{array} \
\hline
\end{array}$

Accepted Answer

The answer of For each of the following events,match the...

Question 3

Cash on the balance sheet does not include:

Accepted Answer

Cash on the balance sheet includes liquid assets that are readily available for use, such as cash in the bank (A), petty cash (B), and cash equivalents (D), which are highly liquid investments typically with maturities of three months or less. Short-term investments (C), however, may not be as readily available as cash or cash equivalents, as they can include investments that mature in more than three months but less than a year, and thus are not classified as cash on the balance sheet.

Question 4

Which of the following situations would cause the balance per bank to be less than the balance per books?

Accepted Answer

Cheques returned as NSF (non-sufficient funds) would cause the bank balance to be less than the balance per books as the bank would not have honored those cheques, resulting in a reduction in the bank balance.

Question 5

On October 31,2018,your company's records say that the company has $16,451.03 in its chequing account.A review of the bank statement shows you have three outstanding cheques total-ling $5,643.01,and the bank has paid you interest of $12.19 and charged you $9.00 in fees.The bank statement dated October 31,2018 would report a balance of:

Accepted Answer

$16,451.03 + $12.19 - $9 = $16,454.22 would be the adjusted balance per company books.
The bank statement would show an unadjusted balance of $16,454.22 + $5,643.01 = $22,097.23.

Question 6

When you identify outstanding cheques in performing a bank reconciliation,you must:

Accepted Answer

Outstanding cheques are those cheques that have been issued by the company but have not yet been cleared by the bank. Therefore, the balance per bank has not yet been reduced by the amount of outstanding cheques. To reconcile the balance, we need to deduct the amount of outstanding cheques from the balance per bank. Deducting the outstanding cheques from the balance per books is incorrect as this will result in an incorrect balance. Similarly, adding the outstanding cheques to either the balance per books or balance per bank is incorrect, as this will also result in an incorrect balance.

Question 7

When a company makes a sale and accepts a credit card payment from a customer,the company:

Accepted Answer

The answer of When a company makes a sale and...

Question 8

According to the changes in financial reporting which of the following is required to communicate with the external auditors and ensure that they are able to effectively perform their work?

Accepted Answer

The audit committee of the board of directors is responsible for communicating with the external auditors and ensuring that they are able to effectively perform their work. This is in line with the changes in financial reporting which require increased communication and cooperation between the audit committee and external auditors. The board of directors, CEO and corporate officers may also have a role in financial reporting, but the audit committee of the board of directors is specifically responsible for communication with external auditors.

Question 9

Which of the following items on a bank reconciliation would require an adjusting journal entry on the company's books?

Accepted Answer

A bank service charge is an expense that the company may not have recorded in its books until it receives the bank statement. Therefore, it requires an adjusting journal entry to reflect this expense in the company's accounting records.

Question 10

Which of the following bank reconciliation items would not result in an adjusting journal entry in the company's books?

Accepted Answer

Outstanding cheques are checks that have been written by the company and deducted from the company's cash account, but have not yet been cleared by the bank. They do not require an adjusting journal entry in the company's books because they have already been recorded in the company's cash account when the checks were issued.

Question 11

In addition to examining the company's financial statements and report whether they were presented fairly without any misstatement what else is required of the external auditors by the recent changes in financial reporting?

Accepted Answer

The recent changes in financial reporting require external auditors to also review and test the effectiveness of the company's internal controls, in addition to examining the financial statements and reporting any misstatements or irregularities. Option A is incorrect as auditors are not required to report to the press, but to the company's management and audit committee. Options C and D are unrelated to the auditor's responsibilities.

Question 12

Deposits in transit:

Accepted Answer

Deposits in transit are deposits that have been made by the company but have not yet been processed by the bank. The bank may take a few days to process the deposit, so the company records the deposit as a deposit in transit until the bank processes it. Therefore, deposits in transit have been recorded by the company but not yet by the bank.

Question 13

Fraud investigators refer to what elements as being part of the fraud triangle?

Accepted Answer

The fraud triangle consists of three elements: incentive or pressure to commit fraud, opportunity, and rationalization or justification for the fraudulent behavior. Therefore, the best choice is B, which includes all three elements of the fraud triangle. Option A is missing rationalization, option C is missing opportunity, and option D is missing incentive.

Question 14

When you identify interest received from the bank in performing a bank reconciliation,you must:

Accepted Answer

Interest received from the bank increases the company's account balance, but this increase may not yet be recorded in the company's books. Therefore, to reconcile the bank statement with the company's records, the amount of interest received should be added to the balance per books.

Question 15

You have received the bank statement for your company's account and need to reconcile it with your cash account.Your records show an ending balance for the month of $12,722.40 while the bank's records show an ending balance of $12,367.16.
The bank charged $8 in service fees and paid $26.05 in interest.All but three cheques written during the month were processed by the bank without incident during the month.The three exceptions were:
1)Check #841 was correctly processed by the bank as $981.27 but was mistakenly recorded by you as $781.27.
2)Check #853 for $64.57 had not yet been processed by the bank.
3)Check #855 for $683.46 had not yet been processed by the bank.

Accepted Answer

The answer of You have received the bank statement for...

Question 16

On October 31,2018,the bank's records say that your company has $12,956.73 in its chequing account.You are aware of three outstanding cheques for a total of $2,112.19.During October 2018,the bank rejected two deposited cheques from customers totalling $654.19 because of insufficient funds and charged you $12.00 in service fees.You had not yet received notice about the bad cheques,but you were aware of and have recorded the $12.00 of service fees.Prior to adjustment on October 31,2018,your Cash account would have a balance of:

Accepted Answer

Unadjusted balance per books = $12,956.73 - $2,112.10 + $654.19 = $11,498.73.

Question 17

Identify whether a company debits (Dr)or credits (Cr)its Cash account to record each of the following transactions:
_____ The company writes a $197.06 cheque.
_____ The company deposits a $5,000 cheque into its account.
_____ In a bank reconciliation,the company discovers that it recorded a $127.35 payment to a supplier as $27.35.
_____ The bank pays $16.00 interest on the company's account.
_____ The company electronically transfers $867 to a supplier.
_____ A customer's cheque in the amount of $31 is returned by the bank as NSF.
_____ The bank charges $12 in fees to the company's bank account.
_____ When preparing the bank reconciliation,the company's accountant discovers a cheque in the amount of $1,000 that had been written but had not been recorded.
_____ A customer electronically transfers $189.43 to the company's bank account.

Accepted Answer

The answer of Identify whether a company debits (Dr)or credits...

Question 18

When preparing this month's bank reconciliation,you find that you failed to record a $95 deposit for a payment you received from a customer.You immediately prepare a journal entry to record the deposit.Which of the following describes the actions to be taken when preparing next month's bank reconciliation?

Accepted Answer

Since the deposit was recorded in the books immediately after it was discovered, it will be reflected in both the bank statement and the company's books by the time the next bank reconciliation is prepared. Therefore, no further adjustment is necessary for the next reconciliation.

Question 19

Which of the following situations would cause the balance per bank to be more than the balance per books?

Accepted Answer

Outstanding cheques (checks that have been written and recorded in the company's cash account but have not yet cleared the bank) reduce the balance per books but do not affect the balance per bank until they are processed. Therefore, the presence of outstanding cheques would cause the balance per bank to be more than the balance per books, as the bank has not yet deducted these amounts from the account.

Question 20

Match between columns
                        Premises: 1 Loan covenants
1 Restricted cash
1 Asset misappropriation
1 outstanding cheque
1 Time lags
1 Cash equivalents
1 SOX
1 NSF cheque

Accepted Answer

The Answer of Examples of this include deposits in transit is...

Quiz 5: Fraud, internal Control, and Cash