Chapter 7

Question 1

On a check, the number that identifies the account where a payment may be drawn

Answer 1

Account Number

Question 2

Document explaining the reasons for the different between depositor’s cash records and depositor’s cash balance in its bank account

Answer 2

Bank Reconciliation

Question 3

Document from the bank that reports the activity in the customer’s account

Answer 3

Bank Statement

Question 4

Copies of the maker’s cashed (paid) checks

Answer 4

Canceled Checks

Question 5

Highly liquid investment that can be converted into cash in 3 months or less

Answer 5

Cash Equivalent

Question 6

Company’s ability to pay current liabilities from cash and cash equivalents

Answer 6

Cash Ratio

Question 7

Document that instructs a bank to pay the designated person or business a specified amount of money

Answer 7

Check

Question 8

Two or more people working together to circumvent internal controls and defraud a company

Answer 8

Collusion

Question 9

An increase in a bank account

Answer 9

Credit Memorandum

Question 10

A decrease in a bank account

Answer 10

Debit Memorandum

Question 11

Deposit recorded by the company but not yet by its bank

Answer 11

Deposit in Transit

Question 12

Bank form that is completed by the customer and shows the amount of each deposit

Answer 12

Deposit Ticket

Question 13

Bypass paper documents by having customer and supplier computers communicate directly

Answer 13

Electronic Data Interchange (EDI)

Question 14

System that transfers cash by electronic communication rather than by paper documents

Answer 14

Electronic Funds Transfer (EFT)

Question 15

Primary method of achieving security in e-commerce

Answer 15

Encryption

Question 16

Procedure that compresses the payment approval process into a single step by comparing the receiving report to the purchase order

Answer 16

Evaluated Receipts Settlement (ERS)

Question 17

Outside accountant that ensures that the financial statements presented are in accordance with GAAP

Answer 17

External Auditor

Question 18

Device that allows members to access a network while keeping nonmembers out

Answer 18

Firewall

Question 19

Maintain a constant balance in petty cash where petty cash tickets and cash always equal the amount allocated for petty cash

Answer 19

Imprest System

Question 20

Employee of the business that ensures policies are followed, legal requirements are met and operations are efficient

Answer 20

Internal Auditor

Question 21

Plan to safeguard assets, have employees follow policy, promote efficiency, and ensure accurate records

Answer 21

Internal Control

Question 22

Report describing management’s responsibility of internal control over financial reporting

Answer 22

Internal Control Report

Question 23

System where customers send their checks to a post office box that belongs to a bank

Answer 23

Lock-Box System

Question 24

Party who issues the check

Answer 24

Maker

Question 25

Check where the maker does not have enough money in their account to pay the check

Answer 25

Nonsufficient Funds (NSF) Check

Question 26

Check issued by a company and recorded on its books but not yet paid by its bank

Answer 26

Outstanding Check

Question 27

The individual or business to whom the check is paid

Answer 27

Payee

Question 28

Fund containing a small amount of cash that is used to pay for minor expenditures

Answer 28

Petty Cash

Question 29

Company that sells its stock to the general public

Answer 29

Public Company

Question 30

Optional attachment to a check that tells the business the reason for the payment

Answer 30

Remittance Advice

Question 31

The 9 digit number on a check that identifies the bank upon which the payment is drawn

Answer 31

Routing Number

Question 32

Requires companies to review internal control and take responsibility for the accuracy of financial report

Answer 32

Sarbanes-Oxley Act (SOX)

Question 33

Dividing responsibility between two or more people to limit fraud and promote accuracy

Answer 33

Separation of Duties

Question 34

Card that shows each authorized person’s signature for a bank account

Answer 34

Signature Card

Question 35

Difference that arises between the balance on the bank statement and company’s books because of time lag

Answer 35

Timing Difference

Question 36

Sequentially numbered document authorizing a cash payment

Answer 36

Voucher