Answered: Cash control systems are the methods…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

1. Cash control systems are the methods and procedures used to ensure --

a. That current obligations are met

b. That excess cash does not exists

c. The safeguarding of cash

d. That unused cash is invested

2. Bank reconciliation -

a. Is the process of transferring money in or out of a bank account

b. Requires that every transaction which will result in a cash payment be verified, approved and recorded before a bank check is prepared.

c. Is an analysis that reflects the bank transactions made by the depositor

d. Explains the difference between the bank balance and the balance shown in the depositor’s records

3. The journal entries for bank reconciliation -

a. are taken from the balance per bank only

b. may include a debit to office expense for bank service charges

c. may include a credit to accounts receivable for an NSF check

d. may include a debit to accounts payable for an NSF check

4. All cash receipts are deposited intact and all cash disbursements are made by means of check. This internal control is known as --

a. Administrative control

b. Imprest system

c. Accounting control

d. Auditing control

5. A cash short or over account --

a. Is not generally accepted

b. Is debited when the petty cash fund proves out over

c. Is debited when the petty cash fund proves out short

d. Is a contra account to cash

6. Entries to record the replenishment of petty cash fund results in a debit to various expense accounts and a credit to cash in bank. This accounting procedures typically exemplifies --

a. Imprest petty cash system

b. Fluctuating petty cash system

c. Internal control

d. Administrative control

7. The following statements relate to cash. Which statement is true?

a. The term “cash equivalent” refers to demand credit instruments such as money order and bank drafts.

b. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover all normal operating expenses for a period of time.

c. Classification of a restricted cash balance as current or noncurrent should parallel the classification of the related obligation for which the cash was restricted.

d. Compensating balances required by a bank should always be excluded from “ cash and cash equivalent”

8. The petty cash fund account under the Imprest fund system is debited --

a. Only when the fund is created

b. When the fund is created and every time it is replenished.

c. When the fund is created and when the size of the fund is increased.

d. When the fund is created and when the fund is decreased.

9. Petty cash fund is --

a. Separately classified as current asset

b. Money kept on hand for making minor disbursements of coin

and currency rather than by writing checks

c. Set aside for the payment of payroll

d. Restricted cash

10. Which of the following would not be classified as cash?

a. Personal checks

b. Travelers’ checks

c. Cashiers’ checks

d. Postdated checks

11. Which of the following should not be considered as cash for financial reporting purposes?

a. Petty cash funds and change funds

b. Money orders, certified checks and personal checks

c. Coins, currency and available funds

d. Postdated checks and IOUs

12.Compensating balance agreements … (choose the incorrect one)

a. Reduces the amount available to the borrower

b. Always involves legal restrictions on the compensating balance

c. Increases the effective interest rate to the borrower

d. Should be disclosed in the notes to financial statements

13. When preparing a bank reconciliation, bank credits are -

a. Added to the bank statement balance

b. Deducted from the bank statement balance

c. Added to the balance per book

d. Deducted from the balance per book

14. Bank reconciliations are normally prepared on a monthly basis to identify adjustments in the depositor’s records and to identify errors. Adjustments should be recorded by the depositor for --

a. Bank errors, outstanding checks and deposits in transits

b. All items, except bank errors, outstanding checks and deposits in transits

c. Book errors and bank errors

d. Bank service charges, NSF checks, outstanding checks and deposits in transits

15. Which of the following should be considered as cash?

a. Certificates of deposits

b. Money market checking accounts

c. Money market savings certificates

d. Postdated checks

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.