chapter 7

Question 1

Internal control is used in a business to:

Answer 1

All of the above:
safeguard its assets, enhance the accuracy and reliability of its accounting records, and ensure compliance with laws and regulations

Question 2

Which of the following was not a result of the Sarbanes-Oxley Act?

Answer 2

Companies must file financial statements with the Internal Revenue Service.

Question 3

Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?

Answer 3

All of these control systems are relevant to a computerized system:
Establishment of responsibility, Segregation of duties, Independent internal verification.

Question 4

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

Answer 4

establishment of responsibility.

Question 5

The use of prenumbered checks in disbursing cash is an application of the principle of:

Answer 5

documentation procedures

Question 6

In a bank reconciliation, deposits in transit are

Answer 6

added to the bank balance

Question 7

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is:

Answer 7

bank service charges

Question 8

Which of the following items in a cash drawer at November 30 is not cash?

Answer 8

an NSF check

Question 9

Which statement correctly describes the reporting of cash?

Answer 9

Cash is listed first in the current assets section.

Question 10

Which of the following would not be an example of good cash management?

Answer 10

Invest temporary excess cash in stock of a small company.

Question 11

A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $4 in cash. In recording the check:

Answer 11

debit Cash Over and Short for $2.