Chapter 4 Quiz

A  Cash received from the sale of a used company truck.

B  Cash paid for supplies.

C  Cash received from a customer.

D  Cash received from the issuance of common stock.

A  Personally certify the company’s financial statements.

B  Work more than 40 hours per week.

C  Hire an independent auditor.

D  Be compensated only when the company is profitable.

A  Interest on bank deposit.

B  Deposits outstanding.

C  Checks outstanding.

D  An error by the bank.

A  Receipt of cash from selling a building.

B  Payment of dividends to stockholders.

C  Receipt of cash from bank borrowing.

D  Payment for prepaid insurance.

A  Important documents should be kept in a safe place, and electronic files should be backed up regularly.

B  Management periodically determines whether the amount of physical assets agree with the accounting records.

C  The company should establish formal guidelines to handle cash receipts and make purchases.

D  Employees should be made aware of the company’s internal control policies.

A  The employee who authorizes payment should also be the employee who prepares the check.

B  Employees responsible for making cash disbursements should also be in charge of cash receipts.

C  Require only one signature for larger checks.

D  Ensure checks are serially numbered and signed only by authorized employees.

A  As owners of the company.

B  As creditors of the company.

C  In their own best interest.

D  As stewards of the company’s assets.

A  Allow the company to save cash for major future purchases.

B  Provide a convenient form of payment for the company’s customers.

C  Pay employee salaries at the end of each period.

D  Provide cash on hand for minor expenditures.

A  Use accrual-basis accounting.

B  File reports with the Securities and Exchange Commission.

C  Use either cash or accrual- basis accounting.

D  File their tax return with the Internal Revenue Service.

A  Enacted the Securities and Exchange Commission.

B  Established the Financial Accounting Standards Board.

C  Organized the Internal Revenue Service.

D  Passed the Sarbanes-Oxley Act.

A  Cash received from the sale of a used company truck.

B  Cash paid for supplies.

C  Cash received from a customer.

D  Cash received from the issuance of common stock.

A  Cash received from the issuance of common stock.

B  Cash received from a bank loan.

C  Cash paid for supplies.

D  Cash received from the sale of a used company truck.

A  Debit card sales, checks received from customers and coins and currency.

B  Coins and currency.

C  Checks received from customers.

D  Debit card sales.

A  Increased regulations related to corporate executive accountability.

B  Increased regulations related to auditor–client relations.

C  Increased regulations related to auditor–client relations, increased regulations related to corporate executive accountability and increased regulations related to internal control.

D  Increased regulations related to internal control.

A  Repayment of borrowed money.

B  Payment for employee salaries.

C  Services provided to customers on account.

D  Payment for a new operating equipment.

A  The employee who authorizes payments should also prepare the check.

B  Set maximum purchase limits on debit cards and credit cards.

C  Make all cash disbursements using cash rather than debit cards or credit cards.

D  The employee responsible for making cash disbursements should be in charge of cash receipts.

A  Maintain normal operations.

B  Respond quickly to new opportunities.

C  Prevent bankruptcy.

D  Maintain normal operations, respond quickly to new opportunities and prevent bankruptcy.

A  The amount of cash withdrawn from the fund during the accounting period.

B  The amount of cash used to establish the fund.

C  All vouchers written during the accounting period.

D  The established balance of the fund less all vouchers written during the accounting period.

A  Accounts receivable.

B  Accounts payable.

C  Checks received from customers.

D  Investments with maturity dates greater than three months.

A  Subtracted from the company’s cash balance.

B  Added to the company’s cash balance.

C  Subtracted from the bank’s cash balance.

D  Added to the bank’s cash balance.

A  Bank service fees.

B  NSF check.

C  Deposits outstanding.

D    

E  Interest on bank deposit.

A  Added to the bank’s cash balance.

B  Subtracted from the bank’s cash balance.

C    

D  Subtracted from the company’s cash balance.

E  Added to the company’s cash balance.

A  Cash used to pay employee salaries.

B  Investment in short-term securities.

C  Cash on hand to pay for minor purchases.

D  Cash held in the bank.

A  Provide healthcare for employees.

B  Provide financial statements.

C  File their tax return with the Internal Revenue Service.

D  Document and assess internal controls.

A  Allowing customers to pay with a debit card.

B  Recording cash receipts as soon as they are received.

C  Allowing customers to pay with a credit card.

D  Requiring the employee receiving the cash from the customer to also deposit the cash into the company’s bank account.

A  NSF checks.

B  Checks outstanding.

C  Service fees.

D  An error by the company.

A  Improper asset valuation, fictitious revenues from a fake customer and mismatching revenues and expenses.

B  Improper asset valuation.

C  Mismatching revenues and expenses.

D  Fictitious revenues from a fake customer.

A  Timing differences of recording cash transactions by the company and by the bank.

B  Cash theft by the company’s employees.

C  Accounting errors made by the company.

D  Accounting errors made by the bank.

A  Payment for advertising.

B  Cash sales to customers.

C  Payment of dividends to stockholders.

D  Payment for land.

A  $120,000.00

B  $50,000.00

C  $90,000.00

D  $20,000.00

A  Only checks are used for payment of purchases and the same person who makes deposits should also record the deposits.

B  The person who makes deposits should NOT record the deposits.

C  The same person who makes deposits should also record the deposits.

D  Only checks are used for payment of purchases.

A  The risk of failing to achieve company objectives.

B  The reliability of financial information.

C  The ethical tone set by top management.

D  Accountability through separation of duties.

A  Credit card purchases.

B  Prepaid insurance.

C  Investments in a 6-month Certificate of Deposit.

D  Amounts held in checking accounts.

A  Retained Earnings is debited.

B  Cash is debited.

C  Accounts Payable is credited.

D  Expenses are credited.

A  The external auditors of the company should have no contact with managers while the audit is taking place.

B  The company’s financial accountant should not share information with the company’s tax accountant.

C  Duties of middle-level managers of the company should be clearly separated from those of top executives.

D  Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

A  Deposits outstanding.

B  An error by the bank.

C  Interest earned.

D  Checks outstanding.

A  The company’s external auditors.

B  The company’s top executives.

C  The company’s stockholders.

D  The company’s board of directors.

A  Supplies Expense.

B  Accounts Payable.

C  Cash.

D  Supplies.

A  The establishment of the Securities and Exchange Commission (SEC).

B  Corporate scandals involving unethical behavior of top executives.

C  Increasing pressure of foreign competition for American products and services.

D  Increasing inflation.

A  To assist top executives in planning employment capacity.

B  To help managers determine which projects are likely to be more profitable.

C  To minimize tax payments to the Internal Revenue Service (IRS).

D  To improve the accuracy and reliability of accounting information.