QUIZ #8

1. Control is most effective when two people are responsible for a task.
O A. True
C B. False

2. Cash is prone to theft or misuse.

C A. True
O B. False

3. Mail receipts that result from billings and credit sales are the least common way
cash is received by most businesses.
O A. True
C B. False

4. There are only two parties to a cheque: the maker and the payee.
O A. True
C B. False

5. The lack of agreement between the bank balance and the book balance is due to
time lags and errors.
C A. True
O B. False

6. The principles of internal control include all of the following except:

O A. authorization.
C B. combination of duties.
O C. safeguarding assets and records.
O D. independent verification.

7. All of the following items are included in a bank reconciliation except:

O A. deposits in transit.
O B. outstanding cheques.
O C. errors.
C D. list of physical assets.

8. In large companies, independent internal verification is often monitored by the:

O A. bookkeeper.
O B. controller.
C C. internal auditors.
O D. treasurer.
9. All of the following are classified as cash except:
O A. cheques.
O B. money orders.
O C. money on deposit in a bank.
C D. postdated cheques.

10. Having different individuals receive cash, record cash receipts, and hold the cash
is an example of:
O A. establishment of responsibility.
C B. segregation of duties.
O C. documentation procedures.
O D. independent internal verification.

11. Using pre-numbered cheques and having an approved invoice for each cheque
are examples of:
O A. establishment of responsibility.
O B. segregation of duties.
C C. documentation procedures.
O D. independent internal verification.

12. A disbursement system that uses electronic means (telephone or computer) to

transfer cash from one location to another is called a (an):
O A. automated system.
C B. electronic funds transfer system (EFT).
O C. internal system.
O D. voucher system.

13. Making payments from a petty cash fund requires:

O A. a credit to Cash.
O B. a credit to Petty Cash.
O C. a debit to various expense accounts.
C D. no accounting entry at the time payment is made from petty cash.

14. A debit balance in Cash Over and Short is reported as a (an):

O A. liability.
C B. miscellaneous expense.
O C. miscellaneous revenue.
O D. asset.

15. The party who issues a cheque is the:

O A. payee.
O B. payer.
C C. maker.
O D. bank.
16. All of the following would involve a debit memorandum except:
O A. a bank service charge.
O B. an NSF cheque.
O C. the cost of printing cheques.
C D. interest earned.

17. On a bank reconciliation, outstanding cheques are:

O A. added to the bank balance.
C B. deducted from the bank balance.
O C. added to the book balance.
O D. deducted from the book balance.

18. On a bank reconciliation, collection of a note receivable by the bank is:

O A. added to the bank balance.
O B. deducted from the bank balance.
C C. added to the book balance.
O D. deducted from the book balance.

19. Journal entries are required by the depositor for all of the following except:
O A. collection of a note receivable.
O B. an NSF cheque.
O C. bank service charges.
C D. bank errors.

20. Cash equivalents include all of the following except:

O A. money market funds.
O B. short-term deposits
O C. treasury bills.
C D. compensating balances.