Question 1

When preparing the bank reconciliation James found that the bank had incorrectly debited the business' bank account with $200. The proper procedure is to:

Accepted Answer

A)   deduct $200 from the bank balance in the general ledger and notify the bank.
B)   do nothing as the bank will adjust the error when they balance.
C)   deduct $200 from the bank balance in the general ledger.
D)   add $200 to the bank statement balance in the bank reconciliation and notify the bank.E) C) and D)
F) A) and C)

Question 2

The preparation of a cash budget ensures that:

Accepted Answer

A)   an entity can meet its commitments as they fall due.
B)   wasteful cash outlays are minimised.
C)   cash funds are not left lying idle.
D)   all of the aboveE) None of the above
F) A) and C)

Question 3

Which of the following is a principle of good cash management?

Accepted Answer

A)   Investing surplus cash.
B)   Keeping inventory at a level where no item required by a customer is ever out of stock.
C)   Paying creditors before the due date.
D)   Offering large cash discounts to debtors to pay within 30 days.E) B) and D)
F) A) and D)

Question 4

Which of the following statements concerning internal control is true?

Accepted Answer

A)   Double entry accounting is an internal control.
B)   Fraud will be eliminated by good internal control practices.
C)   Physical counts of stock on hand are not part of internal control procedures.
D)   It is OK to pay accounts out of unbanked receipts as long as a note is made of what has occurred.E) A) and C)
F) All of the above

Question 5

The ratio that measures solvency by relating cash flows from operating activities to current liabilities is the:

Accepted Answer

A)   working capital ratio.
B)   times interest ratio.
C)   cash flow adequacy ratio.
D)   short-term cash flow adequacy ratio.E) A) and B)
F) C) and D)

Question 6

Which of the following is not necessarily one of the benefits of effective internal control?

Accepted Answer

A)   Safeguarding of assets
B)   A sound liquidity position
C)   More accurate accounting data
D)   A more efficient accounting systemE) B) and D)
F) B) and C)

Question 7

Sugar Industries makes all sales on credit with 60% of the payment received in the month of sale, 20% in the month following the sale, 15% in the 2nd month following sale, and the remaining 5% remains uncollected.
Budgeted sales are:
July $100 000
August $140 000
September $120 000
October $150 000
The budgeted receipts from debtors for September are:

Accepted Answer

A)   $120 000
B)   $135 000
C)   $115 000
D)   $100 000E) A) and B)
F) A) and C) C

Question 8

The procedures adopted by a business to safeguard its assets, promote the reliability of accounting data and encourage compliance with management policies are:

Accepted Answer

A)   physical controls.
B)   cash budgets.
C)   internal controls.
D)   bank reconciliations.E) A) and B)
F) A) and C)

Question 9

Ignoring GST, what is the correct accounting entry that would need to be made for a customer's cheque for $2800 that has been dishonoured?

Accepted Answer

A)   DR Bank $2800; CR Accounts receivable $2800
B)   DR Accounts receivable $2800; CR Bank $2800
C)   DR Accounts receivable $2800; CR Accounts payable $2800
D)   DR Accounts receivable $2800; CR Discount allowed $2800E) A) and D)
F) None of the above

Question 10

Which of the following is not a feature of good internal control?

Accepted Answer

A)   Regular stocktakes
B)   Labelling of fixed assets
C)   Regular bank reconciliations
D)   Making cash payments from unbanked cash receiptsE) C) and D)
F) All of the above

Question 11

Which of the following is a limitation of internal control?
I The accounting standards
II The cost of the controls
III The possibility of collusion between two or more employees

Accepted Answer

A)   I and III
B)   I and II
C)   II and III
D)   I, II and IIIE) A) and B)
F) A) and C)

Question 12

Bowen Ltd received its monthly bank statement showing a balance of $35 894 Cr at 31 March. On this date cash received from debtors and not yet deposited at the bank totalled $8971 and outstanding cheques were $3465. The amount to appear as cash at bank on the 31 March balance sheet is:

Accepted Answer

A)   $41 400
B)   $44 865
C)   $48 330
D)   $35 894E) None of the above
F) B) and C)

Question 13

Which of the following is a broad principle of cash management that helps ensure that a business remains solvent?

Accepted Answer

A)   Collect cash owing from accounts receivable as quickly as possible.
B)   Invest any cash that is surplus to requirements to earn a return for the business.
C)   Pay accounts payable just before the due date rather than when the statement is first received.
D)   All of the aboveE) A) and B)
F) None of the above

Question 14

Which of the following is not a characteristic of good internal control?

Accepted Answer

A)   Insurance of assets
B)   Joint responsibility for assets
C)   Regular bank reconciliations
D)   Rotation of employees over a range of tasksE) A) and D)
F) A) and B)

Question 15

When preparing a bank reconciliation what would cause the bank statement balance to be less than the adjusted cash balance in the general ledger? (Assume the bank is not in overdraft.)

Accepted Answer

A)   Bank fees
B)   Dishonoured cheques
C)   Outstanding cheques
D)   Outstanding depositsE) All of the above
F) None of the above

Question 16

The cash short and over ledger account, which records the difference between the total of the cash register tape and the actual cash counted from the register:

Accepted Answer

A)   is included in the bank reconciliation.
B)   appears on the balance sheet as liability.
C)   is closed to the profit or loss summary account.
D)   is deducted from the bank account balance in the ledger.E) B) and D)
F) C) and D) C

Question 17

The petty cash fund should be reimbursed at the time the financial statements are prepared so that:

Accepted Answer

A)   expenses are not understated and equity overstated.
B)   petty cash asset is not overstated and expenses understated.
C)   petty cash expenses are not overstated and bank understated.
D)   expenses are not overstated and the petty cash asset understated.E) All of the above
F) A) and C)

Question 18

How many of the following are features of good internal control of cash receipts?
 ∙\bullet∙ Employees who handle cash from customers do not prepare the daily banking.
 ∙\bullet∙ Use of a safe for temporary cash storage
 ∙\bullet∙ Pre-numbering of sales dockets and receipts
 ∙\bullet∙ Use of cash registers and EFTPOS to record cash sales

Accepted Answer

A)   One
B)   Two
C)   Three
D)   Four E) C) and D)
F) A) and B) D

Question 19

Which of the following is not a principle of internal control?

Accepted Answer

A)   Establishing clear lines of responsibility
B)   Division of responsibility for related transactions
C)   Separation of record keeping and custody of assets
D)   Placing excess cash on fixed deposit to earn interestE) All of the above
F) B) and C)

Question 20

While preparing the bank reconciliation Terry discovered that the bank had incorrectly paid cheque number 100389 for $900 more than the amount written on the cheque by the company. The bank account has a positive balance. The proper procedure to correct this bank error is to:

Accepted Answer

A)   add the error to the bank balance in the general ledger.
B)   deduct the error from the bank statement balance in the reconciliation.
C)   add the error to the bank statement balance in the reconciliation and notify the bank.
D)   deduct the error from the bank balance in the general ledger and notify the bank.E) A) and D)
F) C) and D)

Exam 11: Cash Management and Control

When preparing the bank reconciliation James found that the bank had incorrectly debited the business' bank account with $200. The proper procedure is to:

Correct Answer
verified

The preparation of a cash budget ensures that:

Correct Answer
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Which of the following is a principle of good cash management?

Correct Answer
verified

Which of the following statements concerning internal control is true?

Correct Answer
verified

The ratio that measures solvency by relating cash flows from operating activities to current liabilities is the:

Correct Answer
verified

Which of the following is not necessarily one of the benefits of effective internal control?

Correct Answer
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Correct Answer
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C

The procedures adopted by a business to safeguard its assets, promote the reliability of accounting data and encourage compliance with management policies are:

Correct Answer
verified

Ignoring GST, what is the correct accounting entry that would need to be made for a customer's cheque for $2800 that has been dishonoured?

Correct Answer
verified

Which of the following is not a feature of good internal control?

Correct Answer
verified

Which of the following is a limitation of internal control? I The accounting standards II The cost of the controls III The possibility of collusion between two or more employees

Correct Answer
verified

Bowen Ltd received its monthly bank statement showing a balance of $35 894 Cr at 31 March. On this date cash received from debtors and not yet deposited at the bank totalled $8971 and outstanding cheques were $3465. The amount to appear as cash at bank on the 31 March balance sheet is:

Correct Answer
verified

Which of the following is a broad principle of cash management that helps ensure that a business remains solvent?

Correct Answer
verified

Which of the following is not a characteristic of good internal control?

Correct Answer
verified

When preparing a bank reconciliation what would cause the bank statement balance to be less than the adjusted cash balance in the general ledger? (Assume the bank is not in overdraft.)

Correct Answer
verified

The cash short and over ledger account, which records the difference between the total of the cash register tape and the actual cash counted from the register:

Correct Answer
verified
C

The petty cash fund should be reimbursed at the time the financial statements are prepared so that:

Correct Answer
verified

Correct Answer
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D

Which of the following is not a principle of internal control?

Correct Answer
verified

While preparing the bank reconciliation Terry discovered that the bank had incorrectly paid cheque number 100389 for $900 more than the amount written on the cheque by the company. The bank account has a positive balance. The proper procedure to correct this bank error is to:

Correct Answer
verified

Exam 11: Cash Management and Control

When preparing the bank reconciliation James found that the bank had incorrectly debited the business' bank account with $200. The proper procedure is to:

Correct AnswerverifiedShow Answer

The preparation of a cash budget ensures that:

Correct AnswerverifiedShow Answer

Which of the following is a principle of good cash management?

Correct AnswerverifiedShow Answer

Which of the following statements concerning internal control is true?

Correct AnswerverifiedShow Answer

The ratio that measures solvency by relating cash flows from operating activities to current liabilities is the:

Correct AnswerverifiedShow Answer

Which of the following is not necessarily one of the benefits of effective internal control?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

The procedures adopted by a business to safeguard its assets, promote the reliability of accounting data and encourage compliance with management policies are:

Correct AnswerverifiedShow Answer

Ignoring GST, what is the correct accounting entry that would need to be made for a customer's cheque for $2800 that has been dishonoured?

Correct AnswerverifiedShow Answer

Which of the following is not a feature of good internal control?

Correct AnswerverifiedShow Answer

Which of the following is a limitation of internal control? I The accounting standards II The cost of the controls III The possibility of collusion between two or more employees

Correct AnswerverifiedShow Answer

Bowen Ltd received its monthly bank statement showing a balance of $35 894 Cr at 31 March. On this date cash received from debtors and not yet deposited at the bank totalled $8971 and outstanding cheques were $3465. The amount to appear as cash at bank on the 31 March balance sheet is:

Correct AnswerverifiedShow Answer

Which of the following is a broad principle of cash management that helps ensure that a business remains solvent?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of good internal control?

Correct AnswerverifiedShow Answer

When preparing a bank reconciliation what would cause the bank statement balance to be less than the adjusted cash balance in the general ledger? (Assume the bank is not in overdraft.)

Correct AnswerverifiedShow Answer

The cash short and over ledger account, which records the difference between the total of the cash register tape and the actual cash counted from the register:

Correct AnswerverifiedC

The petty cash fund should be reimbursed at the time the financial statements are prepared so that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedD

Which of the following is not a principle of internal control?

Correct AnswerverifiedShow Answer

While preparing the bank reconciliation Terry discovered that the bank had incorrectly paid cheque number 100389 for $900 more than the amount written on the cheque by the company. The bank account has a positive balance. The proper procedure to correct this bank error is to:

Correct AnswerverifiedShow Answer

Correct Answer
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C

Correct Answer
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C

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D

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