Module 2 Accounting

When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded

• In the year after the credit sale is made

• In the same year as the credit sale

• As each credit sale is made

• When an account is written off as uncollectible

A debit balance in the Allowance for Doubtful Accounts

• is the normal balance for that account

• indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.

• indicates that actual bad debt write-offs have been less than what was estimated

• cannot occur if the percentage of receivables method of estimating bad debts is  used

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited

• When a credit sale is past due

• At the end of each accounting period

• Whenever a pre-determined amount of credit sales has been made

• When an account is determined to be uncollectible

The two methods of accounting for uncollectible accounts are the direct write-off method and the

• Accrual Method

• Net Realizable Method

• Bad Debt Method

• Allowance Method

Which of the following items on a bank reconciliation would require an adjusting entry on the company’s books?

• An error by the bank

• Outstanding checks

• A bank service charge

• A deposit in transit

A NSF check should appear in which section of the bank reconciliation?

• Addition to the balance per books

• Deduction from the balance per bank

• Addition to the balance per bank

• Deduction from the balance per books

Which one of the following is not an objective of a system of internal controls?

• Safeguard company assets

• Enhance the accuracy and reliability of accounting records

• Fairness of the financial statements

• Reduce the risks of errors

Which of the following statements correctly describes the reporting of cash?

• Cash is listed first in the current assets section

• Cash cannot be combined with cash equivalents

• Restricted cash funds cannot be reported as a current asset

• Restricted cash funds may be combined with cash

Which of the following is not an internal control procedure for cash?

• Payments should be made with cash

• There should be limited access to cash

• The amount of cash on hand should be kept to a minimum

• Cash should be deposited daily

The reconciliation of the cash register tape with the cash in the register is an example of

• Other Controls

• Independent Internal Verification

• Establishment of Responsibility

• Segregation of Duties