1.
Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets and to enhance the accuracy and reliability of its accounting records.
A. True
B. False


2.
Control is most effective when two people are responsible for a given task.
A. True
B. False


3.
Few internal control systems provide for independent internal verification.
A. True
B. False


4.
Cash is the asset most susceptible to improper diversion and use.
A. True
B. False


5.
Internal control over cash disbursements is more effective when companies pay by check, rather than by cash.
A. True
B. False


6.
Companies use a petty cash fund to pay relatively small amounts.
A. True
B. False


7.
There are two parties to a check: the maker and the payee.
A. True
B. False


8.
A bank issues a debit memorandum when it collects a note receivable for a depositor.
A. True
B. False


9.
The lack of agreement between the bank balance and the book balance is due to time lags and errors.
A. True
B. False


10.
A company records each reconciling item used to determine the adjusted cash balance per books.
A. True
B. False


11.
The principles of internal control include all of the following except:
A.
establishment of responsibility.
B.
combining of duties.
C.
physical, mechanical, and electronic controls.
D.
independent internal verification.


12.
Controls that relate primarily to the safeguarding of assets are:
A.
physical controls.
B.
mechanical controls.
C.
electronic controls.
D.
automated controls.


13.
Large companies often assign independent internal verification to the:
A.
bookkeeper.
B.
controller.
C.
internal auditors.
D.
treasurer.


14.
All of the following are classified as cash except:
A.
checks.
B.
money orders.
C.
money on hand.
D.
postdated checks.


15.
Having different individuals receive cash, record cash receipts, and hold the cash is an example of:
A.
establishment of responsibility.
B.
segregation of duties.
C.
documentation procedures.
D.
independent internal verification.


16.
Using pre-numbered checks and having an approved invoice for each check is an example of:
A.
establishment of responsibility.
B.
segregation of duties.
C.
documentation procedures.
D.
independent internal verification.


17.
A disbursement system that uses wire, telephone, or computers to transfer cash balances from one location to another is called a(n):
A.
automated system.
B.
electronic funds transfer system.
C.
internal system.
D.
voucher system.


18.
Making payments from a petty cash fund requires:
A.
a credit to Cash.
B.
a credit to Petty Cash.
C.
a debit to various expense accounts.
D.
no accounting entry to record a payment when it is made from petty cash.


19.
A company reports a debit balance in Cash Over and Short as a(n):
A.
liability.
B.
miscellaneous expense.
C.
miscellaneous revenue.
D.
asset.


20.
The party who issues a check is the:
A.
payee.
B.
payer.
C.
maker.
D.
bank.


21.
All of the following would involve a debit memorandum except:
A.
a bank service charge.
B.
an NSF check.
C.
the cost of printing checks.
D.
interest earned.


22.
On a bank reconciliation, outstanding checks are:
A.
added to the bank balance.
B.
deducted from the bank balance.
C.
added to the book balance.
D.
deducted from the book balance.


23.
On a bank reconciliation, collection of a note receivable by the bank is:
A.
added to the bank balance.
B.
deducted from the bank balance.
C.
added to the book balance.
D.
deducted from the book balance.


24.
Journal entries are required by the depositor for all of the following except:
A.
collection of a note receivable.
B.
an NSF check.
C.
bank service charges.
D.
bank errors.


25.
Cash equivalents include all of the following except:
A.
money market funds.
B.
bank certificates of deposit.
C.
U.S. Treasury bills.
D.
restricted cash.


26.
A petty cash fund of $200 is replenished when the fund contains $5 in cash and receipts of $192. The entry to replenish the fund would
A.
credit Cash Over and Short for $3.
B.
debit Cash Over and Short for $3.
C.
debit Miscellaneous Expense for $3.
D.
credit Petty Cash for $192.


27.
If a check correctly written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to:
A.
add $45 to the bank balance.
B.
add $45 to the book's balance.
C.
deduct $45 from the bank balance.
D.
deduct $438 from the book balance.


28.
Which of the following is not an element of the fraud triangle?
A.
Rationalization.
B.
Financial pressure.
C.
Segregation of duties.
D.
Opportunity.


29.
Dewitt Company gathered the following information in preparing its bank reconciliation on May 31: Cash Balance per the Books, May 31, $3,500; Deposits-In-Transit, $1,150; Note and Interest Collected by the Bank, $850; Bank Service Charge, $20; Outstanding Checks, $2,500; NSF check, $170. The adjusted cash balance per the books at May 31 is
A.
$4,160.
B.
$3,010.
C.
$5,510.
D.
$2,460.



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