Accounting - Internal Controls (CH8)

The principles of internal control include: 

• Maintain minimal records
• Separate recordkeeping from custody of assets
• Bond all employees
• Require automated sales systems

A properly designed internal control system: 

• Lowers the company's risk of loss
• Insures profitable operations
• Eliminates the need for an audit
• Requires the use of non-computerized systems

Two clerks sharing the same cash register is a violation of which internal control principle? 

• Insure assets
• Maintain adequate records
• Establish responsibilities
• Apply technological controls

Which internal control principle prescribes the use of pre-numbered printed checks? 

• Technological controls
• Maintain adequate records
• Establish responsibilities
• Divide responsibility for related transactions

The impact of technology on internal controls includes: 

• Elimination of the need for regular audits
• Elimination of fraud
• Elimination of separation of duties
• Reduced processing errors

Cash equivalents: 

• Are short-term, highly liquid investment assets
• Include 6-month certificates of deposit
• Include checking accounts
• Are recorded in petty cash

A bank statement provided by the bank includes: 

• A listing of deposits in transit
• A list of outstanding checks
• A list of petty cash amounts
• The beginning and the ending balance of the depositor's account

Preparing a bank reconciliation on a monthly basis is an example of: 

• Protecting assets by proving the accuracy of cash records
• Establishing responsibility
• Separation of duties
• Poor internal control

The number of days' sales uncollected: 

• Is calculated by dividing accounts receivable by sales
• Is used to evaluate the liquidity of receivables
• Measures a company's debt to income
• Measures a company's ability to pay its bills on time

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled: 

• Petty Cash
• Cash Lost
• Bank Reconciliation
• Cash Over and Short