Question 1

A company plans to decrease a $200 petty cash fund to $75. The current balance in the account includes $45 petty cash payment in receipts and $165 in currency. The entry to reduce the fund will include a:

Accepted Answer

To decrease the petty cash fund from $200 to $75, a debit of $90 is needed ($200 - $75 = $125 decrease). This will be recorded by debiting the Cash account for $90. There is no need for a debit to Cash Short and Over or Miscellaneous Expenses, nor a credit to Petty Cash or Cash.

Question 2

Martha Company has an established petty cash fund in the amount of $500. The fund was last reimbursed on November 30. At the end of December, the fund contained the following petty cash receipts: If, in addition to these receipts, the petty cash fund contains $301 of cash, the journal entry to reimburse the fund on December 31 will include:

Accepted Answer

The answer of Martha Company has an established petty cash...

Question 3

Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

Accepted Answer

The total amount in the petty cash fund should be $450. The custodian has $62.50 in cash and $382.50 in receipts, totaling $445. Therefore, $5 is missing. To replenish the fund, a credit to Cash for $387.50 is needed to bring the fund back to $450.

Question 4

The internal document prepared by a department manager that informs the purchasing department of its needs that lists the merchandise needed and requests that it be purchased is the

Accepted Answer

A purchase requisition is a document prepared by a department manager to inform the purchasing department of the merchandise needed and requests that it is purchased. It serves as an internal document and is used as the basis for creating a purchase order.

Question 5

Outstanding checks refer to checks that have been:

Accepted Answer

Outstanding checks are checks that have been written, recorded on the company books, and sent to the payee, but they have not yet been paid by the bank. They are also known as uncleared checks.

Question 6

During the month of September, Norris Industries issued a check in the amount of $845 to a supplier on account. The check cleared the bank during September. The disbursement was recorded incorrectly as $854. The journal entry to correct this mistake when discovered will include:

Accepted Answer

The error was an overstatement of $9 ($854 recorded instead of $845). To correct this, a credit to Accounts Payable for $9 is needed to reduce the liability to the correct amount.

Question 7

The document that is an itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is the

Accepted Answer

An invoice is a document that lists the items sold to a customer by a vendor along with sales prices, terms of the sale, and the customer's name. It is an itemized statement of goods prepared by the vendor. A purchase requisition is a document used by an organization to request goods or services, a purchase order is a document used to authorize the purchase of goods or services, a receiving report is a document used to verify that goods or services have been received as ordered, and invoice approval is the process of reviewing and authorizing payment for a received invoice.

Question 8

A check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period. As a result, in preparing this period's reconciliation, the amount of this check should be:

Accepted Answer

The check is still outstanding, meaning it has not yet been cleared by the bank. Therefore, it should be deducted from the bank balance of cash in the reconciliation process.

Question 9

A company had $43 missing from petty cash that was not accounted for by petty cash receipts. The correct procedure is to:

Accepted Answer

When petty cash is short, the correct procedure is to debit Cash Over and Short account and credit the Petty Cash account for the amount of cash that is missing. This will account for the discrepancy and ensure that the books are accurate. Therefore, option A is the best choice as it follows the correct procedure.

Question 10

A company made a bank deposit on September 30 that did not appear on the bank statement dated as of September 30. In preparing the September 30 bank reconciliation, the company should:

Accepted Answer

Deposits in transit, such as the one described, are amounts that have been recorded by the company but not yet reflected on the bank statement due to timing differences. Therefore, they should be added to the bank statement balance in a bank reconciliation to reconcile the company's book balance of cash with the bank statement balance.

Question 11

A seller of goods or services, usually a manufacturer or wholesaler, is known as a:

Accepted Answer

A seller of goods or services is known as a vendor. The other options are not applicable to a seller, as a payee is the recipient of payment, a vendee is a buyer, a creditor is a person or entity owed money, and a debtor is a person or entity that owes money.

Question 12

The document that the purchasing department prepares and sends to the vendor to place an order is the

Accepted Answer

The document that the purchasing department prepares and sends to the vendor to place an order is the purchase order. A purchase requisition is an internal document used to request goods or services from other departments within the organization. An invoice is a document sent by the vendor to request payment. A receiving report is a document used to record the receipt of goods or services, and invoice approval is the process of reviewing and authorizing payment of invoices. Therefore, the best choice is B) Purchase order.

Question 13

An analysis that explains any differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

Accepted Answer

A bank reconciliation is the process of comparing the depositor's records with the bank statement to identify any differences between the two balances. This analysis helps to identify errors, omissions, or fraudulent activity in the account. Internal audit, bank audit, trial reconciliation, and analysis of debits and credits may be part of the bank reconciliation process but are not the primary analysis to explain differences in the account balance.

Question 14

In reimbursing the petty cash fund:

Accepted Answer

When reimbursing the petty cash fund, appropriate expense accounts are debited to reflect the expense that was paid for using the petty cash fund. This helps to ensure that the expense is recorded accurately in the company's financial records. Additionally, Petty Cash account is credited to reduce the balance since the fund has been reimbursed. Therefore, options A, B, and C are not correct, and option E is not feasible since an expense was incurred.

Question 15

In the process of reconciling Marks Enterprises' bank statement for September, Mr. Marks compiles the following information: The adjusted cash balance per the books on September 30 is:

Accepted Answer

The answer of In the process of reconciling Marks Enterprises'...

Question 16

Which of the following events would cause a bank to debit a depositor's account?

Accepted Answer

When the depositor authorizes the bank to charge the account for new checks, it is a request for the bank to remove funds from the account, or debit the account.

The other options: 
B) The bank collecting a note receivable and related interest would result in a credit to the depositor's account (increasing the balance), not a debit. 
C) If the depositor discovers outstanding checks at month-end, this would not result in a debit, but rather a reduction in the balance as the checks clear. 
D) If the bank determines there are deposits in-transit, this would not result in a debit, but rather an increase in the balance once the deposits clear. 
E) If the bank incorrectly charged the account twice, then a credit would be issued to correct the error, not a debit.

Question 17

On a bank reconciliation, the amount of an unrecorded bank service charge should be:

Accepted Answer

Bank service charges are expenses that have been deducted by the bank but not yet recorded in the company's books. Therefore, to reconcile the bank statement with the company's records, these charges need to be deducted from the book balance of cash.

Question 18

On a bank reconciliation, an unrecorded debit memorandum for printing checks is:

Accepted Answer

An unrecorded debit memorandum for printing checks represents a deduction from the company's book balance of cash because the company's bank account has been debited for the printing expense, but the company has not recorded it in its books. Therefore, the company's book balance needs to be decreased to reflect this transaction.

Question 19

The internal document that is prepared to notify the appropriate persons that ordered goods have been received and describes the quantities and condition of the goods is the

Accepted Answer

A receiving report is a document prepared by the receiving department to notify the appropriate persons that ordered goods have been received and describes the quantities and condition of the goods. A purchase requisition is a document used to request goods or services from a supplier. A purchase order is a commercial document issued by a buyer to a seller, indicating the type, quantities, and agreed prices for products or services. An invoice is a commercial document issued by a seller to a buyer, indicating the products or services sold and the amount owed. Invoice approval refers to the process of verifying the accuracy and legitimacy of an invoice before payment is made.

Question 20

If a check correctly written and paid by the bank for $794 is incorrectly recorded in the company's books for $749, how should this error be treated on the bank reconciliation?

Accepted Answer

The company's books show a lower amount than what was actually paid by the bank, so the book balance needs to be adjusted upward. Therefore, $45 should be subtracted from the book balance to reflect the correct amount of $794.

Quiz 8: Cash and Internal Controls