Chapter 4 questions

Question 1

Define internal control

Answer 1

companies policies and procedures to reduce chance of fraud

Question 2

what items are considered cash

Answer 2

coins, currency, balances in certain checking accounts, money orders, bank drafts, certificates of deposits, items payable on demand

Question 3

why is cash more suspectable to embezzlement

Answer 3

it’s the most liquid asset

Question 4

what effect does a debit and credit memo have on a cash account

Answer 4

A debit memo reduces balance of your cash account

A credit memo increases balance of your cash account.

Question 5

what’s the purpose of bank reconciliation

Answer 5

comparing your cash book to bank statement

Question 6

What’s an outstanding check

Answer 6

a liability to the payor and has not yet been cashed,check hasnt been deposited yet

Question 7

Whats a deposit in transit

Answer 7

money that the company has received, but yet to be processed by bank.company records deductions from bank balence even though bank statement doesnt reflect it yet.

Question 8

How is a NSF check accounted for in accounting records

Answer 8

Non sufficient funds check-
first impacts the bank
then impacts the customer

Question 9

Three elements of fraud triangle

Answer 9

opportunity- recognizes weakness that allows for fraud
Pressure- recognizes environment that motivates fraud
rationalization- recognizes human tendancy to justify fraud