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Exam 8: Cash and Internal Controls

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Question 31

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List the principles of internal control.

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Principles of internal control include e...

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Question 32

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A bank reconciliation explains any differences between the balance of a checking account on the depositor's records and the balance reported on the bank statement.

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Question 33

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Canceled checks are checks the bank has paid and deducted from the customer's account during the period.

A voucher system establishes procedures for verifying, approving, and recording obligations for eventual cash disbursement.

Human fraud is driven by the triple-threat of fraud: Opportunity, collusion, and rationalization.

What is the purpose of the days' sales uncollected ratio?

Describe a petty cash account and its purpose.

Pelcher Co. maintains a $400 petty cash fund. On January 31, the fund is replenished. The accumulated receipts on that date represent $110 for office supplies, $140 for merchandise inventory, and $70 for miscellaneous expenses. There is a cash overage of $4. Based on this information, the amount of cash in the fund before the replenishment is:

A purchase order is a document the purchasing department sends to the vendor to place an order.

Easton Co. deposits all cash receipts on the day they are received and makes all cash payments by check. At the close of business on June 30, its Cash account shows a debit balance of $60,209. Easton's June bank statement shows $58,349 on deposit in the bank. Determine the adjusted cash balance using the following information: $\begin{array}{|l|r|}\hline \text { Deposit in transit } & \$ 3,800 \\\hline \text { Outstanding checks } & \$ 1,925 \\\hline \text { Check printing fee, not yet recorded by company } & \$ 15 \\\hline \text { Interest earned on account, not yet recorded by the company } & \$ 30\\\hline\end{array}$ The adjusted cash balance should be:

Franklin Company's bank reconciliation as of August 31 is shown below. $\begin{array} { | l | r | l | r | } \hline \text { Bark balance } & \$ 14,237 & \text { Book balance } & \$ 13,162 \\\hline + \text { Deposit in transit } & 4,500 & \text { Bank service fees } & - 50 \\\hline \text { - Outstanding checks } & \underline { - 3,900 } & \text { Note collected } & \underline { 1,725 } \\\hline \text { Adjusted bank balance } & \$ 14,837 & \text { Adjusted book balance } & \$ 14,837 \\\hline\end{array}$ The adjusting journal entries that Clayborn must record as a result of the bank reconciliation include:

The entry to increase the balance in petty cash from $50 to $75 would include a credit to Petty Cash of $25.

On a bank reconciliation, the amount of an unrecorded bank service charge should be:

The number of days' sales uncollected is used to:

The Sarbanes-Oxley Act (SOX)requires managers and auditors of companies whose stock is traded on an exchange to document and certify the system of internal controls. What are the specific requirements for auditors set forth by SOX?

Assume that the custodian of a $450 petty cash fund has $62 in coins and currency plus $383 in receipts at the end of the month. The entry to replenish the petty cash fund will include:

Collusion is a form of fraud where individuals collaborate to thwart separation of duties.

Clayborn Company' bank reconciliation as of May 31 is shown below. $\begin{array} { | l | r | r | r | } \hline \text { Bank balance } & \$ 15,800 & \text { Book balance } & \$ 17,025 \\\hline \text { + Deposit in transit } & 5,200 & \text { Bank service fees } & - 25 \\\hline \text { - Outstanding checks } & \underline { 4,600 } & \text { NSF returned } & \underline { - 600 } \\\hline \text { Adjusted bank balance } & \$ 16,400 & \text { Adjusted book balance } & \$ 16,400 \\\hline\end{array}$ One of the adjusting journal entries that Clayborn must record as a result of the bank reconciliation includes:

Havermill Co. establishes a $250 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $73 for Office Supplies, $137 for merchandise inventory, and $22 for miscellaneous expenses. The fund has a balance of $18. On October 1, the accountant determines that the fund should be increased by $50. The journal entry to record the increase in the fund balance on October 1 is:

At the end of the day on March 15, the cash register's record shows $1,957, but the count of cash in the register is $1,965. Prepare the general journal entry to record the day's cash sales.