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Exam 6: Cash and Internal Controls

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Question 1

Multiple Choice

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Internal control procedures for cash receipts do not require that:

A) Custody over cash is kept separate from its recordkeeping.
B) All collections for sales are be received immediately upon making the sales.
C) Clerks having access to cash in a cash register should not have access to the register tape or file.
D) An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.
E) Cash sales should be recorded on a cash register at the time of each sale.

F) All of the above
G) B) and E)

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B

Question 2

True/False

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A purchase order is a document the purchasing department sends to the vendor to place an order.

A) True
B) False

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Question 3

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Canceled checks are checks the bank has paid and deducted from the customer's account during the period.

Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the establishment of the fund on September 1 is:

The following information is available for the Victor Company for its March 31 bank reconciliation: From the March 31 bank statement:

The number of days' sales uncollected is calculated by:

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.

Approved vouchers are recorded in a journal called the voucher register.

Following are seven items a through g that would cause Rembrandt Company's book balance of cash to differ from its bank statement balance of cash. a. A service charge imposed by the bank. b. A check listed as outstanding on the previous period's reconciliation and still outstanding at the end of this month. c. A customer's check returned by the bank is marked "Not Sufficient Funds(NSF)". d. A deposit mailed to the bank on the last day of the current month and not recorded on this month's bank statement. e. A check paid by the bank at its correct $190 amount recorded in error in the company's check register at $109. f. An unrecorded credit memorandum indicating that bank collected a note receivable for Rembrandt Company and deposited the proceeds in the company's account. g. A check written in the current period that is not yet paid or returned by the bank. Indicate where each item, letters a-g, would appear on Rembrandt Company's bank reconciliation by placing its identifying letter in the parentheses in the proper section of the form below. $\begin{array}{|l|l|l|l|}\hline\text { Bank statement cash balance }&&\text { Book balanoe of cash }\\\hline \text { Add: } & (\text { ) } & \text { Add: } & () \\\hline & () & & () \\\hline & () & & () \\\hline & () & & () \\\hline \text { Deduct: } & () & \text { Deduct: } & () \\\hline & () & & () \\\hline & () & & () \\\hline & () & & () \\\hline\text { Reconciled balance }&&\text { Reconciled balance }\\\hline\end{array}$

Cash equivalents meet all of the following criteria except:

Based on the above information, prepare a bank reconciliation for the Victor Company. 2. Prepare the necessary general journal entries to adjust cash to the reconciled balance.

According to good internal control policies, a person who controls an asset also maintains that asset's accounting records.

A voucher system's control over cash disbursements begins when a company incurs an obligation that will result in eventual payment of cash.

A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

A properly designed internal control system is a key part of systems design, analysis, and performance.

Vouchers should be used for purchases of inventory and all other expenditures made within a company.

All of the following are considered effective cash management principles except:

A company's internal control system:

__________________________ reflects the liquidity of a company's accounts receivable.

An invoice is an itemized statement of goods prepared by the customer listing the customer's name, items sold, sales prices, and terms of sale.