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Exam 7: Internal Control and Cash

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Question 51

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DMS offers lawn and garden maintenance services. DMS customers pay largely by cheque and submit a remittance slip with their payment, to identify thecustomer account number to which the payment is applied. Ditta Mistry is the company owner and she attended a conference on internal controls. She plans to institute stronger internal controls over customer cash receipts. What controls might Ditta introduce?

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Someone other than the accountant should...

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Question 52

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When used to monitor and control operations, internal control systems are a low priority for managers.

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Question 53

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Prenumbered printed cheques are an example of which internal control principle?

Bonding does not discourage loss from theft because employees know that bonding is an insurance policy against loss from theft.

Internal control procedures for cash receipts require:

Identify each of the following items as either (a)cash or (b)cash equivalent._____ 1. Coins_____ 2. Petty cash_____ 3. Three-month certificate of deposit_____ 4. Currency_____ 5. Certified cheque_____ 6. Cashier's cheque_____ 7. Loose change in a coffee tin_____ 8. Money orders

The Petty Cash account is a separate chequing account used for small amounts.

Credit cards are seen as an advantage by businesses because the cash is normally received quicker than with other forms of extended credit.

Preventing unauthorized access to company resources is one of the most difficult and time-consuming tasks for internal control experts.

In reconciling the bank balance, an unrecorded debit memorandum for printing cheques should be:

A bank reconciliation results in creating an adjusted bank balance as well as an adjusted book balance.

Cash equivalents are short-term investments that a company invests in to increase earnings.

Maintaining accurate records is an important internal control principle.

Identify how each of the following items would be treated on a bankreconciliation by entering one of the following codes in the space provided. 1. Outstanding cheques.2. Deposits in transit.3. Cheque #32, subtracted from the bank balance on last month's bank reconciliation, was returned with this month's statement.4. Included with the bank statement was a debit memo for bank servicecharges.5. Cash receipts placed in the bank's night depository after banking hours were not included on the bank statement prepared on the same date.6. Cheque #47 was written and recorded by the bank as $753. The business recorded the cheque as $735.7. A cheque listed as outstanding on last month's bank reconciliation was not returned with the current month's cancelled cheques.8. A deposit listed as outstanding on last month's bank reconciliationappeared as a deposit on the current month's bank statement.9. A credit memo enclosed with the bank statement shows that the bank collected a note on behalf of the account holder.10. A debit memo enclosed with the bank statement shows that the bankpaid a note on behalf of the account holder.

All monies disbursed from petty cash should be documented by a petty cash receipt.

A bank statement includes:

A properly designed internal control system is a key part of systems design, analysis, and performance.

Cash consists of:

The impact of technology on internal controls includes:

The use of internal controls provides guaranteed protection against losses due to operating activities.