Question Details

CHAPTER 8 INTERNAL CONTROL AND CASH PART 3


TRUE-FALSE STATEMENTS

21. A voucher system is used by many large companies as a means of controlling cash
receipts.
22. The petty cash fund eliminates the need for a bank checking account.
23. Cash register overages are deposited in the petty cash fund and cash shortages are
made-up from the petty cash fund.
24. A deposit ticket is a negotiable instrument that can be transferred to another party by
endorsement.
25. If a company deposits all its receipts in the bank and pays all its bills by check, then the
monthly bank statement balance will always agree with the company's record of its
checking account balance.
26. Checks from customers who pay their accounts promptly are called outstanding checks.
27. All reconciling items in determining the adjusted cash balance per books require the
depositor to make adjusting journal entries to the Cash account.
28. A bank reconciliation is generally prepared by the bank and sent to the depositor along
with cancelled checks.
29. Cash equivalents are highly liquid investments that can be converted into a specific
amount of cash.
30. Cash which is restricted for a specific use should be separately reported.
8 - 6 Test Bank for Accounting Principles, Eighth Edition
Additional True-False Questions
31. Internal control consists of the plan of organization and all of the related methods and
measures adopted within a business to (a) safeguard its assets, and (b) enhance the
accuracy and reliability of its accounting records.
32. In general, documents should be prenumbered and all documents should be accounted
for.
33. Collusion may result when one individual circumvents prescribed controls and may
significantly impair the effectiveness of a system.
34. Personnel who handle cash receipts should have the option of taking a vacation or not.
35. The duties of approving an item for payment and paying the item should be done by
different departments or individuals.
36. The custodian of the petty cash fund has the responsibility of recording a journal entry
every time cash is used from the fund.
37. A debit memorandum could show the collection of a note receivable by the bank.
38. To obtain maximum benefit from a bank reconciliation, the reconciliation should be
prepared by an employee who has no other responsibilities pertaining to cash.