Chapter 8 – Accounting – Weygandt
- An effective system of internal control will segregate functions between individuals to reduce the potential for errors and fraud. TRUE
- When one individual is responsible for all of the related activities, the potential for errors and fraud is increased. TRUE
- Independent internal verification should be made periodically and should be done by an employee who is independent of the employee responsible for the information. TRUE
- The duties of receiving cash, recording cash receipts transactions, and having custody of cash should be assigned to a single capable individual. FALSE
- At the end of an accounting period, a debit balance of $99.00 in the Cash Over and Short account would be reported in the income statement as Miscellaneous Revenue. FALSE
- A check is a written order signed by the depositor directing the bank to pay a specified sum of money to a designated recipient. TRUE
- Cash proceeds collected by the bank for a depositor would be identified in the bank statement by a credit memorandum to explain the entry. TRUE
- The lack of agreement between the balance per books and the balance per bank is due to time lags and errors by either party. TRUE
- An outstanding check that was also outstanding the previous month should not be included in the reconciliation of the bank statement this month. FALSE
- A postage due expense of $4.75 would be paid out of petty cash and the entry to record the transaction would reduce the balance of the Petty Cash account by that amount. FALSE
Which of the following is a primary concern of internal control?
- Promote training programs and control incentives
- Enhancing the reliability of accounting data
- Ensuring fairness of the financial statements
- Encouraging adherence to prescribed managerial performance
ANSWER – B – Enhancing the reliability of accounting data
Each of the following is an attribute of internal control except
- segregation of duties.
- establishment of responsibility.
- independent internal verification.
- a sound marketing plan.
ANSWER – D – a sound marketing plan.
A company issues a check for $75 but records it incorrectly as $57. On the bank recon-ciliation, the $18 should be
- deducted from the balance per bank.
- added to the balance per bank.
- deducted from the balance per books.
- deducted from the balance per books and added to the balance per bank.
ANSWER – C – deducted from the balance per books.
Irwin, Inc. has the following assets at the balance sheet date:
Cash in bank—savings account $4,000
Amounts due from customers 7,000
Post-dated checks 2,000
Checking account balance 6,000
Which amount should be reported as cash in the balance sheet?
- $10,000
- $6,000
- $11,000
- $13,000
ANSWER – A – $10,000.
A $100 petty cash fund has cash of $17 and valid receipts for $81. The journal entry upon replenishment would include a
- credit to Cash for $81.
- credit to Cash Over and Short for $2.
- debit to Cash for $81.
- debit to Cash Over and Short for $2.
ANSWER – D – debit to Cash Over and Short for $2.
Isakson Company has a contribution margin per unit of $15 and a contribution margin ratio of 60%.
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