14) Payment by check is an important internal control because:
A) the check provides a record of the payment.
B) the check must be signed by an authorized official who should study the evidence supporting the
payment.
C) all checks must be approved by the bank’s internal audit department before they are paid.
D) A and B
15) For good internal control:
A) the purchasing agent should also receive the goods.
B) the purchasing agent should also approve the invoice for payment.
C) the purchasing agent should not receive the goods or approve the invoice for payment.
D) the purchasing agent should prepare an EFT for payment.
16) A system of handling cash receipts by mail whereby customers send checks in payment of their
accounts directly to a post office box controlled by a bank is a(n):
A) imprest system.
B) lock-box system.
C) phishing system.
D) online banking system.
17) A receiving report:
A) identifies the need for merchandise and begins the purchasing process.
B) identifies that the merchandise has been received and ends the purchasing process.
C) is sent by the purchasing department to the customer who purchases the item.
D) includes the invoice, receiving report, purchase order and purchase request.
18) Once the company receives newly purchased inventory, it prepares a(n) ________ to list the goods
received.
A) invoice
B) purchase approval form
C) receiving report
D) EFT transfer
19) A payment packet of documents:
A) reports the arrival of items purchased.
B) is sent by the purchasing department to the vendor selling the item.
C) identifies the need for merchandise and begins the purchasing process.
D) includes the invoice, receiving report and purchase order.
20) After approving an invoice for payment:
A) the receiving department should examine the payment packet to make sure all the documents agree.
B) payment is made and the payment packet should then be stamped “paid” by the person in the
treasurer’s department who has authorized the disbursement.
C) checks should be returned to and then mailed by the department who prepared them.
D) the person who ordered the goods should examine the payment package to make sure all the
documents agree.
21) A company’s petty cash fund:
A) cannot be replaced by the use of debit cards.
B) is kept by two or more employees to ensure that disbursements can readily be made.
C) is opened with a particular amount of cash.
D) balance equals the cash left in the petty cash fund minus the total of the paid vouchers in the cash
box.
22) A petty cash fund:
A) is established to pay large nonrecurring expenses.
B) is established to pay for minor purchases.
C) should have a least two custodians.
D) should issue checks for certain purchases.
23) Which of the following is a CORRECT statement about the petty cash fund?
A) To set up the petty cash fund, a check is issued to the chief financial officer.
B) The custodian of the fund has sole responsibility for accounting for the fund.
C) The cash in the fund must always equal the opening balance of the fund.
D) The petty cash fund must be maintained at a bank.
24) Payments by EFT are an important internal control for all of the following reasons EXCEPT for:
A) the EFTs provide a record of the payments.
B) the EFT must be approved by an authorized official.
C) all EFT payments are made by the cashier in the Accounting Department.
D) the authorizing official should study the evidence supporting the payment before approving the
EFT.
25) Seidner Store sells expensive watches. An inventory at the beginning of the day showed 46 watches
in the store. 7 new watches were added to the inventory during the day. The point–of-sale terminal
recorded 3 watches sold. An inventory taken at the end of the day should show how many watches still
in the store?
A) 53
B) 50
C) 46
D) Cannot be determined from the data
26) An imprest petty cash fund of $600 was established for minor disbursements. At the end of the
month, the fund included petty cash tickets for the purchase of $200 in supplies, $73 for meals, $82 for
fuel, and $67 for taxi fare. How much cash should be left in the fund?
A) $245
B) $178
C) $1022
D) $600
27) An imprest petty cash fund of $900 was established for minor disbursements. At the end of the
month the fund included petty cash tickets for the purchase of $181 in supplies, $45 for postage, $76 for
fuel and a delivery charge of $73. How much cash should left in the fund?
A) $525
B) $598
C) $674
D) $719
28) Examples of items purchased with petty cash are:
A) delivery cost for package.
B) taxi fare for executive of company.
C) box of name tags for convention.
D) all of the above.
29) Debit cards are being used:
A) in place of petty cash funds.
B) for small purchases.
C) for package delivery fees.
D) all of the above.
30) Hill Company established a petty cash fund of $500. The first transaction was the purchase of
stamps for $46. Which of the following statements is CORRECT?
A) The petty cash custodian prepares a petty cash voucher to list the item purchased.
B) The amount of cash on hand should equal $454.
C) The amount of cash on hand and the cash voucher should be maintained in a cash box or other
secure device.
D) All of the statements are correct.
31) When customer checks are received in the mail, which employees are involved in processing the
checks?
A) mailroom employee, treasurer, cashier in the treasurer’s department
B) mailroom employee, accounting department employee, controller
C) mailroom employee, accounting department employee, controller, treasurer
D) mailroom employee, accounting department employee, controller, treasurer, cashier in the
treasurer’s department
32) With regard to customer checks received by mail, which statement is TRUE?
A) The debit to Cash by the accounting department should equal the amount deposited in the bank by
the mailroom employee.
B) The customers’ Accounts Receivable accounts should be adjusted by the cashier in the treasury
department for the payments received.
C) The controller compares the customers’ checks to the remittance advices sent from the mailroom.
D) The accounting department debits Cash and credits Accounts Receivable. The cashier in the
treasurer’s department deposits the checks in the bank.
33) The New Jewelry Store sells mostly costume jewelry, but it also sells an expensive watch brand. The
owner of the store is concerned about monitoring sales and inventory of the watches. He decided to
perform a quick inventory count of the watches on a daily basis as a control procedure. The owner
counts 63 watches at the end of business on Thursday. On Friday, a shipment of 24 watches is received.
The point-of-sale terminal for Friday indicates that 6 watches were sold that day. A quick inventory of
watches at the end of business on Friday indicates that 70 watches are on hand. How many, if any,
watches are probably stolen?
A) 0
B) 6
C) 11
D) 7
34) When companies use debit cards for purchases of relatively small amounts:
A) employees who need to make the purchases may obtain permission from a supervisor to use the
company’s debit card.
B) supervisors do not require receipts for the small purchases because prior approval was given.
C) a petty cash fund is still needed.
D) the employee who used the debit card compares the receipts to the EFT amounts on the bank
statement.
35) Companies use a bank lock-box system to:
A) ensure that all checks are properly received by the company’s mailroom employees.
B) get the cash to the bank in a more timely manner.
C) allow the bank to post collections to customers’ Account Receivable accounts.
D) increase internal controls over their purchase and payment processes.
1) A budget is a financial plan that helps coordinate business activities.
2) When preparing a cash budget, a company must determine how much cash it will need in a future
period.
3) The cash budget period can span any length of time.
4) A cash budget does all of the following EXCEPT:
A) helps a company manage cash by planning cash receipts and cash payments.
B) determines if the company will have excess cash available for investing purposes.
C) determines if the company will need to borrow money.
D) assess the riskiness of a new product.
5) When preparing a cash budget, the budgeted balance is:
A) the beginning cash balance.
B) the budgeted cash payments.
C) the minimum amount of cash the company needs.
D) the budgeted cash receipts.
6) Managers control cash receipts and payments, as well as ending cash balances, through a(n):
A) sales budget.
B) operating budget.
C) statement of cash flows.
D) cash budget.
7) In a cash budget, if the cash available before new financing falls below the budgeted balance:
A) the company should reduce its cash receipts.
B) the company can invest the excess cash.
C) the company will need new financing.
D) the company is facing bankruptcy.
8) A company has a beginning cash balance of $1000. For the year, the company estimates cash
payments of $81,900. It has a desired ending cash balance of $5200 and anticipates no new financing.
The estimated cash receipts are:
A) $75,700.
B) $82,900.
C) $80,900.
D) $86,100.
9) The beginning cash balance is $3000, estimated cash receipts are $108,000, and estimated cash
payments are $107,000. How much cash must be borrowed to have a desired ending balance of $9000?
A) $13,000
B) $3000
C) $9000
D) $5000
10) A recent cash budget showed estimated cash receipts of $164,000, estimated cash payments of
$160,000, and a desired ending cash balance of $15,000, with no new financing. The beginning cash
balance was:
A) $11,000.
B) $19,000.
C) $15,000.
D) unknown.
11) In the cash budget, new financing is needed if:
A) the cash available before new financing exceeds the budgeted cash balance.
B) the budgeted cash balance exceeds the cash available before new financing.
C) the cash used for investing exceeds the budgeted cash balance.
D) the budgeted cash balance exceeds the cash used for investing.
12) In the cash budget, examples of cash payments do NOT include:
A) purchase of inventory with cash.
B) payment of operating expenses.
C) payment of dividend.
D) depreciation expense.
13) In the cash budget, the beginning balance Cash plus budgeted cash receipts minus ________, equals
Cash available before new financing.
A) budgeted cash payments
B) budgeted cash balance
C) cash used for investing activities
D) cash used for investing and financing activities
14) Zeman Company prepares a cash budget. The budgeted cash balance is $8,000,000. The company
has budgeted cash payments of $5,400,000 and budgeted cash receipts of $10,300,000. The beginning
balance of cash is $0. What amount of new financing is required?
A) No new financing is required.
B) $4,900,000
C) $2,600,000
D) $3,100,000
15) Kulvekowski Company prepares a cash budget. The beginning cash balance is $1,000,000. The
budgeted cash balance is $800,000. The company has budgeted cash payments of $500,000 and budgeted
cash receipts of $1,400,000. What amount of cash is available for investing?
A) $0
B) $1,900,000
C) $500,000
D) $1,100,000