Chapter 4 Flashcards
1
Q
What are the 2 reasons that companies would issue incorrect financial statements?
A
- Errors
2. Fraud
2
Q
What are accidental errors in recording (or failing to record) transactions or in applying accounting rules?
A
Errors
3
Q
What occurs when a person intentionally deceives another person for personal gain or to damage that person?
A
Fraud
4
Q
What is the difference between an error and fraud?
A
An error is accidental while fraud is intentional
5
Q
What is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employer’s resources?
A
Occupational fraud
6
Q
What are the 3 elements that are present when fraud occurs?
A
- Opportunity
- Motivation
- Rationalization
7
Q
What can be done to help minimize fraud?
A
Eliminating one of the 3 elements that are present when fraud occurs
8
Q
Of the three fraud elements, which one do companies have the greatest ability to eliminate?
A
Opportunity
9
Q
What is a formal procedure that attempts to eliminate the opportunity element of fraud?
A
Internal controls
10
Q
What represents plans to safeguard the company’s assets and improve the accuracy and reliability of accounting information?
A
Internal control
11
Q
Who are entrusted with the resources of both the company’s lenders and owners?
A
Managers
12
Q
Who acts as stewards or caretakers of the company’s assets?
A
Managers
13
Q
What are two of the highest-profile cases of accounting fraud in U.S. history?
A
The collapse of Enron and WorldCom
14
Q
Who used questionable accounting practices to avoid reporting billions in debt and losses in its financial statements?
A
Enron
15
Q
Who misclassified certain expenditures to overstate assets and profitability?
A
WorldCom
16
Q
True or False:
The auditor can’t have any type of relationship with the company
A
True
17
Q
What act established a variety of guidelines related to auditor-client relations and internal control procedures?
A
The Sarbanes-Oxley Act
18
Q
Who has the authority to establish standards dealing with auditing, quality control, ethics, independence, and other activities relating to the preparation of audited financial reports?
A
The Oversight board
19
Q
Which of the following statements is NOT true of the Sarbanes-Oxley Act (SOA) of 2002?
a. All companies in the U.S. fall under its provisions.
b. It helped establish guidelines for internal control procedures.
c. It helped establish corporate executive accountability.
d. It helped establish guidelines for auditor-client relations.
A
a. All companies in the U.S. fall under its provisions.
20
Q
Which companies does the SOA apply to?
A
Companies who are required to file financial statements with the SEC
21
Q
What are the policies and procedures that help ensure that management’s directives are being carried out?
A
Control activities
22
Q
What identifies and analyzes internal and external risk factors that could prevent a company’s objectives from being achieved?
A
Risk assessment
23
Q
What sets the overall ethical tone of the company with respect to internal control?
A
The control environment
24
Q
What is required of internal activities and reporting of deficiencies?
A
Continual monitoring
25
List the 3 ways to detect fraud
1. Auditors
2. Reconciliations
3. Performance Reviews
26
Who signs a report each year certifying adequacy of internal controls?
CEOs and CFOs
27
Who provides an opinion on management’s assessment of internal control over financial reporting?
Auditors
28
Can Auditors test all accounts?
No
29
Why can't Auditors test all accounts?
It's too timely and costly
30
Activities such as authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees is an example of what preventative control?
Separation of Power
31
Assets and accounting records must be kept safe and accessible only to authorized personnel is an example of what preventative control?
Physical Control
32
Only personnel with authorization should be allowed to collect money, process transactions, or make purchases is an example of what preventative control?
Proper Authorization
33
Employees should be trained to carry out their job and must be made aware of any internal control procedures, ethical responsibilities, and channels for reporting irregular activities is an example of what preventative control?
Employee Management
34
Only authorized personnel should have passwords to conduct electronic business transactions; firewalls are maintained to prevent unauthorized access; and the system’s antivirus software should be regularly updated is an example of what preventative control?
E-Commerce Controls
35
If a company places cash receipts from the day in a safe or bank deposit box, this would be an example of:
a. Separation of duties
b. Physical control
c. Reconciliation
d. Performance review
b. Physical control
36
What are internal control systems easily susceptible to?
Collusion
37
What occurs when two or more people act together to circumvent (avoid) internal controls?
Collusion
38
Who are the ones who must take final responsibility for the establishment and success of internal controls?
Top executives
39
Everyone in the company has an impact on the operations and effectiveness of internal control, but who must take final responsibility?
a. Internal auditors
b. Top executives
c. The firm’s attorney
d. The majority shareholder
b. Top executives
40
# Fill in the Blanks:
Anything that matures ________ or less is considered cash
3 months
41
# Fill in the Blank:
Anything that matures 3 months or less is considered _____
Cash
42
# Fill in the Blank:
Anything that matures ________ or less is considered _____
1. 3 months
| 2. Cash
43
Which of the following would NOT be considered a cash equivalent?
a. Credit card sales for the day
b. Debit card sales for the day
c. Money orders received from customers
d. Certificate of deposit (CD) that matures one year from now
d. Certificate of deposit (CD) that matures one year from now
44
What are generally defined as investments that mature within three months from the date of purchase?
Cash equivalents
45
What is an important control used by nearly all companies to help maintain control of cash?
Bank Reconciliation
46
What matches the balance of cash in the bank account with the balance of cash in the company’s own records ?
The bank reconciliation
47
What occur when the company records transactions either before or after the bank records the same transactions?
Timing differences
48
What 2 things do we need to identify in order to understand why the company's balance and the bank's balance differ?
1. Timing differences
| 2. Any errors
49
List 2 cash transactions recorded by the company, but not yet recorded by its bank
1. Deposits Outstanding
| 2. Checks Outstanding
50
What are cash receipts of the company that have not been added to the bank’s record of the company’s balance?
Deposits Outstanding
51
What are checks the company has written that have not been subtracted from the bank’s record of the company’s balance?
Checks Outstanding
52
On a bank reconciliation sheet does checks outstanding go under the bank's side or the company's side?
The bank's side
53
On a bank reconciliation sheet does deposits outstanding go under the bank's side or the company's side?
The bank's side
54
On a bank reconciliation sheet is the deposits outstanding a positive or negative amount?
A positive amount (your depositing money)
55
On a bank reconciliation sheet is the checks outstanding a positive or negative amount?
A negative amount (your writing a check)
56
What are items that cannot be located on the bank statement?
Reconciling items
57
On a bank reconciliation sheet what does the bank's cash balance begin with?
The per bank statement
58
On a bank reconciliation sheet what does the company's cash balance begin with?
The general ledger
59
What are common items that will increase the company’s cash balance?
1. Notes received
2. Interest earned from note
3. Interest earned on bank account
60
What are common items that will decrease the company’s cash balance?
1. NSF checks
2. Debit card purchases
3. Electronic funds transfers (EFTs)
4. Bank service fees
61
What does NSF stand for?
Nonsufficient funds
62
What are NSF checks?
Checks that bounce back
63
On a bank reconciliation sheet is interest earned a positive or negative amount?
A positive amount
64
On a bank reconciliation sheet is a bank service fee a positive or negative amount?
A negative amount
65
On a bank reconciliation sheet is a NSF check a positive or negative amount?
A negative amount
66
On a bank reconciliation sheet is a note received by the bank a positive or negative amount?
A positive amount
67
What side of a bank reconciliation sheet does note received by the bank go under?
The company's side
68
On a bank reconciliation sheet is an unrecorded EFT a positive or negative amount?
A negative amount
69
On a bank reconciliation sheet is an error a positive or negative amount?
It can be either or
70
On a bank reconciliation sheet is an unrecorded debit card a positive or negative amount?
A negative amount
71
On a bank reconciliation sheet what does the bank's cash balance end with?
The bank's balance per reconciliation
72
On a bank reconciliation sheet what does the company's cash balance end with?
The company's balance per reconciliation
73
What do you have to do after you do you bank reconciliation sheet?
You have to make your adjusting entries
74
Which of the following items would be found on the “bank side,” or the left-hand side, of the bank reconciliation?
a. Interest income received on the account
b. Deposit outstanding
c. NSF check from a customer
d. Service fee charged by the bank
b. Deposit outstanding
75
What 3 things are commonly found on the Bank's Cash Balance?
1. Deposits Outstanding
2. Checks Outstanding
3. Bank errors
76
How would an NSF check from a customer be treated on a bank reconciliation?
a. Addition on the bank side
b. Deduction on the bank side
c. Addition on the company side
d. Deduction on the company side
d. Deduction on the company side
77
After you make your bank reconciliation sheet you have to make adjusting entries for new entries:
a. Only on the company's side
b. Only on the bank's side
c. On both sides
d. On neither side, you don't have to do adjusting entries
a. Only on the company's side
78
Filling in the Blank:
In an adjusting entry you _____ cash for items that add to the balance
Debit (4-53)
79
Filling in the Blank:
In an adjusting entry you _____ cash for items that subtract from the balance
Credit (4-53)
80
How would an NSF check from a customer be recorded in the accounting records?
a. Debit Accounts Receivable; Credit Cash
b. Debit Cash; Credit Accounts Receivable
c. Debit Accounts Payable; Credit Cash
d. Debit Cash; Credit Miscellaneous Expense
a. Debit Accounts Receivable; Credit Cash
81
What is a small amount of cash kept on hand to pay for minor purchases?
A Petty Cash Fund
82
Accounting for the petty cash fund involves recording transactions/entries to do what 3 things?
1. Establishing the fund
2. Recognizing expenditures (expenses) from the fund
3. Replenishing the fund
83
When you are accounting for the petty cash fund do you need to record transactions that are done with debit cards and checks?
No
84
When you are accounting for the petty cash fund why don't you need to record transactions done with debit cards and checks?
They are already recorded in the bank reconciliation sheet
85
When you are accounting for the petty cash fund do you need to record transactions that are done with credit cards?
Yes
86
Make a journal entry:
Establish a petty cash fund of $200
Remove cash from the bank and place it on hand at the company
Debit: Petty Cash Fund $200
Credit: Cash $200
87
When you make a journal entry to establish a petty cash fund what do you debit and credit?
1. You debit the petty cash fund
| 2. You credit cash
88
When you make a journal entry to recognize expenses from the petty cash fund what do you credit?
The petty cash fund
89
When you are making journal entries for the petty cash fund what do you credit if an expense was made with a credit card?
You credit accounts payable
90
When you are making journal entries for the petty cash fund involving an expense made with a credit card why do you credit accounts payable instead of the petty cash fund?
The expense hasn't been paid for yet and you didn't use any of the petty cash fund money
91
When you make a journal entry to replenish a petty cash fund what do you debit and credit?
1. You debit petty cash
| 2. You credit cash
92
Make a journal entry:
The fund has only $50 left in it, so management withdraws an additional $150 from the bank to replenish the funds.
Petty Cash $150
| Cash $150
93
What's the difference between the journal entries for establishing and replenishing the petty cash fund?
When you establish the petty cash fund the debit is the petty cash fund. When you replenish the petty cash fund the debit is petty cash.
94
What is inflow?
Cash coming in
95
What is outflow?
Cash going out
96
What reports cash balance at the end of the period?
The Balance Sheet
97
What reports cash receipts and cash payments during the period?
The Statement of Cash Flow
98
What's the difference between the balance sheet and the statement of cash flow?
The balance sheet reports at the end of the period while the statement of cash flow reports during the period
99
List the three fundamental types of business activities relating to cash
1. Operating Activities
2. Investing Activities
3. Financing Activities
100
Which activities include cash transactions involving revenue and expense events during the period?
Operating Activities
101
List some examples of operating activities
Cash received from customers, cash paid for rent, utilities, supplies, and salaries
102
Which activities include cash investments in long-term assets and investment securities?
Investing Activities
103
List some examples of investing activities
Purchase or sell of land, equipment, and buildings for cash, buying stock
104
Do investing activities tend to include long-term or short-term assets?
Long-term assets
105
Which activities include transactions designed to finance the business through borrowing and owner investment?
Financing Activities
106
List some examples of financing activities
Issue common stock or pay dividends; borrow or repay debt, taking a loan, companies selling stocks
107
Which of the following items would be categorized as an investing activity on a statement of cash flows?
a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees
c. Paid for the purchase of equipment using cash
108
Which of the following items would be categorized as an operating activity on a statement of cash flows?
a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees
b. Paid for supplies in cash
| d. Paid salaries to employees
109
Which of the following items would be categorized as an financing activity on a statement of cash flows?
a. Borrowed money from the local bank by signing a note to repay the full amount two years later
b. Paid for supplies in cash
c. Paid for the purchase of equipment using cash
d. Paid salaries to employees
a. Borrowed money from the local bank by signing a note to repay the full amount two years later
110
Which of the following statements is true?
a. Having too much cash represents idle resources that are not being used to produce revenues.
b. One way to assess cash holdings is to compare cash assets to noncash assets.
c. In recent years cash holdings have increased tremendously.
d. All of the above are true.
d. All of the above are true.
111
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Operating Board
a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.
c. PCAOB establishes standards related to the preparation of audited financial reports.
112
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Corporate executive accountability
a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.
a. Executives must personally certify the company’s financial statements.
113
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Auditor rotation
a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.
d. Lead audit partners are required to change every five years.
114
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Nonaudit services
a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
115
Match each of the following provisions of the Sarbanes-Oxley Act (SOX) with its description: Internal control
a. Executives must personally certify the company’s financial statements.
b. Audit firm cannot provide a variety of other services to its client, such as investment advising.
c. PCAOB establishes standards related to the preparation of audited financial reports.
d. Lead audit partners are required to change every five years.
e. Management must document the effectiveness of procedures that could affect financial reporting.
e. Management must document the effectiveness of procedures that could affect financial reporting.
116
Match each of the following control activities with its definition: Separation of duties
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
117
Match each of the following control activities with its definition: Physical Controls
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
a. The company should maintain security over assets and accounting records.
118
Match each of the following control activities with its definition: Proper authorization
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
119
Match each of the following control activities with its definition: Employee management
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
120
Match each of the following control activities with its definition: Reconciliations
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
121
Match each of the following control activities with its definition: Performance reviews
a. The company should maintain security over assets and accounting records.
b. Management should periodically determine whether the amounts of physical assets of the company match the accounting records.
c. The company should provide employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties.
d. The actual performance of individuals or processes should be checked against their expected performance.
e. Authorizing transactions, recording transactions, and maintaining control of the related assets should be separated among employees.
f. To prevent improper use of the company’s resources, only certain employees are allowed to carry out certain business activities.
d. The actual performance of individuals or processes should be checked against their expected performance.
122
Match each term associated with a bank reconciliation with its description: Checks Outstanding
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
d. Checks written by the company but not yet recorded by the bank.
123
Match each term associated with a bank reconciliation with its description: NSF Checks
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
c. Checks written to the company that are returned by the bank as not having adequate funds.
124
Match each term associated with a bank reconciliation with its description: Company Error
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
f. The company recorded a deposit twice.
125
Match each term associated with a bank reconciliation with its description: Interest Earned
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
e. Money earned on the average daily balance of the checking account.
126
Match each term associated with a bank reconciliation with its description: Deposits Outstanding
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
a. Cash receipts received by the company but not yet recorded by the bank.
127
Match each term associated with a bank reconciliation with its description: Bank Service Fee
a. Cash receipts received by the company but not yet recorded by the bank.
b. Fees imposed by the bank to the company for providing routine services.
c. Checks written to the company that are returned by the bank as not having adequate funds.
d. Checks written by the company but not yet recorded by the bank.
e. Money earned on the average daily balance of the checking account.
f. The company recorded a deposit twice.
b. Fees imposed by the bank to the company for providing routine services.
128
For each transaction, indicate the following: Borrow cash from the bank.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Financing
3. Inflow
129
For each transaction, indicate the following: Purchase supplies on account.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. No
2. N/A (-)
3. N/A (-)
130
For each transaction, indicate the following: Purchase equipment with cash.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Investing
3. Outflow
131
For each transaction, indicate the following: Provide services on account.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. No
2. N/A (-)
3. N/A (-)
132
For each transaction, indicate the following: Pay cash on account for b. above. (Purchase supplies on account)
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Operating
3. Outflow
133
For each transaction, indicate the following: Sell for cash a warehouse no longer in use.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Investing
3. Inflow
134
For each transaction, indicate the following: Receive cash on account for d. above. (Provide services on account.)
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Operating
3. Inflow
135
For each transaction, indicate the following: Pay cash to workers for salaries.
(Enter N/A if the question is not applicable to the statement)
1. Is cash involved?
2. If cash is involved, should it be classified as operating, investing, or financing in a statement of cash flows?
3. Is the cash an inflow or outflow?
1. Yes
2. Operating
3. Outflow
136
Transaction: Issue common stock for cash, $60,000.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. + 60,000
| 2. Financing
137
Transaction: Purchase building and land with cash, $45,000.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. - 45,000
| 2. Investing
138
Transaction: Provide services to customers on account, $8,000.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
N/A
139
Transaction: Pay utilities on building, $1,500.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. - 1,500
| 2. Operating
140
Transaction: Collect $6,000 on account from customers.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. + 6,000
| 2. Operating
141
Transaction: Pay employee salaries, $10,000.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. - 10,000
| 2. Operating
142
Transaction: Pay dividends to stockholders, $5,000.
1. Determine the amount of cash flows (indicate inflows with a “+” and outflows with a “−”).
2. If cash is involved in the transaction, indicate whether it should be classified as operating, investing, or financing in a statement of cash flows.
Enter N/A if the question is not applicable to the statement.
1. - 5,000
| 2. Financing
143
What are the 5 preventative controls?
1. Separation of Power
2. Physical Control
3. Proper Authorization
4. Employee Management
5. E-Commerce Controls
