Question 1

The columns to the right of the total in a petty cash book represent:

Accepted Answer

The columns to the right of the total in a petty cash book represent the accounts for which petty cash was spent. This allows for easy tracking and allocation of expenses.

Question 2

Which of the following is true concerning bank reconciliations?

Accepted Answer

Bank reconciliations are used to ensure that the company's records of cash in its accounting system match the bank's records. The purpose of a bank reconciliation is to identify any differences between them and to ensure that the company's cash account is accurate. This process helps businesses to identify any errors or fraudulent activity that may have occurred. Bank reconciliations are typically performed monthly, but may be done more frequently depending on the size and nature of the business. The decline in the use of cheques may affect the frequency of bank reconciliations but will not eliminate the need for them. Bank reconciliations are not among the most difficult of accounting procedures and are not done annually along with the closing off process.

Question 3

The bank statement arrives and shows a balance of $2 468. The cash account balance is $3 128. In reconciling the bank statement, which of the following would require a deduction from the cash account balance?

Accepted Answer

A dishonoured cheque means that the cheque was not cleared by the bank, so the amount needs to be deducted from the cash account balance.

Question 4

It's time to reconcile petty cash. Vouchers indicate that the following amounts have been used:
Purchase of toner for copy machine for $60 on August 1
Purchase of postage for $25 on August 7
Purchase of petrol for the company truck for $125 on August 14
Purchase of lunch for employee training for $78.90 on August 21
Cost to send an overnight cheque to a vendor of $15.75 on August 28
August began with a balance of $150 in petty cash and fund was replenished with an additional $350 on August 1. Complete the petty cash book for August.

Accepted Answer

The answer of It's time to reconcile petty cash. Vouchers...

Question 5

While, in practice, most transactions are recorded in a subsidiary record, any transaction could be posted in the general journal.

Accepted Answer

While it is true that most transactions are recorded in subsidiary records such as the sales journal, purchases journal, and cash receipts journal, any transaction could technically be posted in the general journal if needed. However, it is not the most efficient or common practice to do so.

Question 6

Cloud computing:

Accepted Answer

Cloud computing utilizes an online server for data storage, which is different from the traditional physical computers.

Question 7

The difference between a cash book and a cash journal is that the cash book allows for the use of analysis columns.

Accepted Answer

The answer of The difference between a cash book and...

Question 8

Which of the following would not be a prime document for the cash receipts journal?

Accepted Answer

Invoices are not considered prime documents for the cash receipts journal as they are related to sales transactions rather than the actual receipt of cash.

Question 9

The owner of a business withdraws $100 from the ATM and neglects to let anyone know so that the transaction can be recorded. This results in an error of commission and does not affect the agreement of the trial balance.

Accepted Answer

An error of commission occurs when an entry is made in the wrong account but with the correct amount. In this case, the transaction is not recorded at all, leading to an error of omission, which can affect the trial balance agreement.

Question 10

The bank statement arrives and shows a balance of $2 468. The cash account balance is $3 128. In reconciling the bank statement, which of the following would require an addition to the cash account balance?

Accepted Answer

The answer of The bank statement arrives and shows a...

Question 11

With a computerised accounting system, there is no need for:

Accepted Answer

A computerized accounting system automatically updates each subsystem, eliminating the need for manual updates.

Question 12

Which of the following is not an advantage of using a control account?

Accepted Answer

This statement is not accurate as agreement between the control account and the ledger account does not guarantee accuracy in the ledger account. Other control measures and reconciliations should be used to ensure the accuracy of the ledger account. A, B, and C are all advantages of using a control account.

Question 13

When petty cash is replenished, the transaction to replenish it includes:

Accepted Answer

When petty cash is replenished, the cash used to replenish it is usually taken from the company's main cash account. Therefore, the transaction to replenish petty cash includes a credit to the main cash account to show that cash has been removed from it. This is balanced with a debit to the various expense accounts that were used to pay for the items for which the petty cash was used (such as office supplies, postage, or minor repairs). There is no need for a debit or credit to the petty cash account itself, as it is simply a placeholder for the cash on hand.

Question 14

A furniture company purchases a new milling machine costing $350 000 on account. Which of the following statements is true?

Accepted Answer

The purchase of a milling machine on account is recorded in the general journal with a debit to Equipment and a credit to Payables/Creditors, as it increases assets and liabilities.

Question 15

The control account for receivables has a balance of $150 000. The receivables ledger account has a debit balance of $150 000. This agreement shows that the account is error free.

Accepted Answer

The agreement between the control account and the receivables ledger account does not guarantee that the account is error-free; errors could still exist within individual entries that offset each other.

Question 16

Which of the following is a disadvantage of using the general journal for recording transactions?

Accepted Answer

Using the general journal provides no grouping of transactions by type, making it harder to quickly analyze or understand the financial information.

Question 17

Disagreement between the bank statement balance and the cash account balance indicates one of more errors in the cash account.

Accepted Answer

Discrepancies between the bank statement balance and the cash account balance can occur due to timing differences, such as outstanding checks or deposits in transit, not necessarily errors.

Question 18

Which of the following is true of a computerised accounting system?

Accepted Answer

The answer of Which of the following is true of...

Question 19

C. Palmer opens a new computer sales and repair business. His assets are: Premises $700 000, Equipment $100 000, Inventory $150 000, and Cash $30 000. His liabilities are: Payables - M Rice $25 000. The journal entry to record the opening would include:

Accepted Answer

The capital is calculated as total assets minus total liabilities. Total assets are $980,000 ($700,000 + $100,000 + $150,000 + $30,000) and liabilities are $25,000. Therefore, capital is $955,000 ($980,000 - $25,000), which is credited.

Quiz 5: Accounting Systems and Internal Control