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In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November's rent was correctly written and drawn for $3,790 but was erroneously entered in the accounting records as $7,390. When reconciling the November bank statement, the company should:


A) Deduct $3,600 from the book balance of cash.
B) Add $3,700 to the bank statement balance.
C) Add $7,390 to the book balance of cash.
D) Deduct $3,600 from the bank statement balance.
E) Add 3,600 to the book balance of cash.

F) A) and B)
G) B) and C)

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Based on the following information, prepare the general journal entries Avisa must make at November 30. The following information is available for the Avisa Company for the month of November: a. On November 30, after all transactions have been recorded, the balance in the company's Cash account has a balance of $27,202. b. The company's bank statement shows a balance on November 30 of $29,279. c. Outstanding checks at November 30 include check #3030 in the amount of $1,525 and check #3556 in the amount of $1,459. d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest-bearing note receivable for Avisa. The bank deducted a $10 collection fee and credited the remainder of $770 to Avisa's account. e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown. f. A deposit placed in the bank's night depository on November 30 totaled $1,675 and did not appear on the bank statement. g. Examination of the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540. h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company's books.

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A deposit in transit on last period's bank reconciliation is shown as a deposit on the bank statement this period. As a result, in preparing this period's reconciliation, the amount of this deposit should be:


A) Added to the book balance of cash.
B) Deducted from the book balance of cash.
C) Added to the bank balance of cash.
D) Deducted from the bank balance of cash.
E) Not included as a reconciling item.

F) C) and D)
G) B) and C)

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What is a voucher system?

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A voucher system is a set of p...

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The Discounts Lost account:


A) Is used with the gross method of recording purchases to highlight the value of purchase discounts taken.
B) Is used with the gross method of recording purchases to highlight the value of purchase discounts available but not taken.
C) Is used to note situations where the accounting department has lost or misplaced paperwork relating to inventory purchases.
D) Is used with the net method of recording purchases to highlight the value of purchase discounts taken.
E) Is used with the net method of recording purchases to highlight the value of purchase discounts available but not taken.

F) C) and D)
G) A) and C)

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The document that is an itemized statement of goods prepared by the vendor listing the customer's name, items sold, sales prices, and terms of the sale is the __________________________.

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An effective voucher system has limited ability to prevent a dishonest employee from colluding with a dishonest supplier to fraudulently acquire cash payments for goods and services not received.

A) True
B) False

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A _____________________________ fund is used for the control of small amounts of cash disbursements.

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On a bank statement, deposits are listed as debits because the bank increases its cash account when the deposit is made.

A) True
B) False

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A company purchases merchandise on November 2 at a $2,400 invoice price (terms 3/10, n/30) and then pays all amounts owed on December 2. Using periodic inventory and net purchases methods, what are the proper entries to record these two transactions?


A)  Nov. 2  Merchandise Inventory 2,400 Accounts Payable 2,400\begin{array}{|l|c|r|r|}\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,400 & \\\hline & \text { Accounts Payable } & & 2,400 \\\hline\end{array}
 Dec. 2  Accounts Payable 2,400 Cash 2,400\begin{array}{|l|l|r|r|}\hline \text { Dec. 2 } & \text { Accounts Payable } & 2,400 & \\\hline & \text { Cash } & & 2,400 \\\hline\end{array}
B)  Nov. 2  Purchases 2,328 Accounts Payable 2,328\begin{array}{|l|l|r|r|}\hline \text { Nov. 2 } & \text { Purchases } & 2,328 & \\\hline & \text { Accounts Payable } & & 2,328 \\\hline\end{array}
 Dec. 2  Accounts Payable 2,328 Cash 2,328\begin{array}{|l|l|r|r|}\hline \text { Dec. 2 } & \text { Accounts Payable } & 2,328 & \\\hline & \text { Cash } & & 2,328 \\\hline\end{array}
C)  Nov. 2  Merchandise Inventory 2,328 Accounts Payable 2,328\begin{array}{|l|c|r|r|}\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \\\hline & \text { Accounts Payable } & & 2,328 \\\hline\end{array}
 Dec. 2  Accounts Payable 2,328 Purchase Discounts Lost 72 Cash 2,400\begin{array}{|l|l|r|r|}\hline \text { Dec. 2 } & \text { Accounts Payable } & 2,328 & \\\hline & \text { Purchase Discounts Lost } & 72 & \\\hline & \text { Cash } & & 2,400 \\\hline\end{array}
D)  Nov. 2  Merchandise Inventory 2,328 Accounts Payable 2,328\begin{array}{|l|c|r|r|}\hline \text { Nov. 2 } & \text { Merchandise Inventory } & 2,328 & \\\hline & \text { Accounts Payable } & & 2,328 \\\hline\end{array}
 Dec. 2  Accounts Payable 2,328 Inventory 72 Cash 2,400\begin{array}{|l|l|r|r|}\hline \text { Dec. 2 } & \text { Accounts Payable } & 2,328 & \\\hline & \text { Inventory } & 72 & \\\hline & \text { Cash } & & 2,400 \\\hline\end{array}
E)  Nov. 2  Purchases 2,328 Accounts Payable 2,328\begin{array}{|l|l|r|r|}\hline \text { Nov. 2 } & \text { Purchases } & 2,328 & \\\hline & \text { Accounts Payable } & & 2,328 \\\hline\end{array}
 Dec. 2  Accounts Payable 2,328 Purchase Discounts Lost 72 Cash 2,400\begin{array}{|l|l|r|r|}\hline \text { Dec. 2 } & \text { Accounts Payable } & 2,328 & \\\hline & \text { Purchase Discounts Lost } & 72 & \\\hline & \text { Cash } & & 2,400 \\\hline\end{array}

F) All of the above
G) None of the above

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A good voucher system includes a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.

A) True
B) False

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Which of the following statements is true regarding the documents in a voucher system?


A) All voucher systems are the same.
B) Recording a purchase is initiated by an invoice approval.
C) A well-designed voucher system will allow department managers to place orders directly with suppliers for control purposes.
D) A voucher system is most commonly used in very small companies to make up for the lack of other internal controls.
E) A well designed voucher system will eliminate all fraud and error.

F) B) and E)
G) C) and D)

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A company reported net sales for Year 1 of $285,000 and $575,000 for Year 2. The year-end balances of accounts receivable were $49,000 for Year 1 and $85,000 for Year 2. Calculate the days' sales uncollected at the end of each year for this company and describe any changes in the apparent liquidity of the company's receivables.

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Year 1: ($49,000/$285,000) x 365 = 63 da...

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List the main principles of internal controls.

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Principles of internal controls include ...

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A set of procedures and approvals that is designed to control cash disbursements and the acceptance of obligations is referred to as a(n) :


A) Internal cash system
B) Petty cash system
C) Cash disbursement system
D) Voucher system
E) Cash control system

F) A) and B)
G) A) and E)

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Outstanding checks are checks the bank has paid and deducted from the customer's account during the month.

A) True
B) False

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A company established a petty cash fund of $100 on September 1. On September 10, the petty cash fund was replenished when there was $16 remaining and there were petty cash receipts for: office supplies, $27; courier, $32; and postage, $22. On September 15, the petty cash fund was increased to $125 in total. Record the above transactions in general journal form.

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Once a good system of internal control is in place, it rarely needs review.

A) True
B) False

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Fluffy Pet Grooming deposits all cash receipts on the day when they are received and all payments are made by check. At the close of business on June 30, its Cash account shows a $14,811 debit balance. Fluffy Pet Grooming's June 30 bank statement shows $14,472 on deposit in the bank. Prepare a bank reconciliation for Fluffy Pet Grooming using the following information: a. Outstanding checks as of June 30 total $2,261 \$ 2,261 . b. The June 30 bank statement included a $75 \$ 75 debit memorandum for bank services. c. Check No. 919 , listed with the canceled checks, was correctly drawn for $789 \$ 789 in payment of a utility bill on June 15. Fluffy Pet Grooming mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $798 \$ 798 . d. The June 30 cash receipts of $2,534 \$ 2,534 were placed in the bank's night depository after banking hours and were not recorded on the Tune 30 bank statement. What is the adjusting journal entry required to record the increase in cash for the adjusted bank balance?


A) Debit to cash $2,261 credit to accounts receivable $2,261.
B) Credit to accounts receivable $2,261 debit to cash $2,261.
C) No adjusting entry is necessary.
D) Debit to cash $2,534 credit to accounts receivable $2,534.
E) Credit to cash $2,534 credit to accounts receivable $2,534.

F) B) and E)
G) C) and E)

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Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much was the credit to cash for the reimbursement?


A) $320.00
B) $202.44
C) $37.56
D) $39.75
E) $41.94

F) A) and B)
G) C) and E)

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