exam 3 notes

What are internal controls?

• Procedures to ensure the integrity of financial and accounting information

• Methods to increase company profits

• Strategies to expand market share

• Techniques to improve employee satisfaction

Which of the following is a factor that causes controls to fail?

• Proper enforcement

• Human error

• Accurate recording

• Strong management

List the three conditions necessary for fraud to occur according to the Fraud Triangle.

• Pressure, Opportunity, Rationalization

• Greed, Opportunity, Rationalization

• Pressure, Opportunity, Motivation

• Pressure, Greed, Rationalization

What is the purpose of bank reconciliation?

• To ensure that the bank's records match the company's records

• To calculate the interest earned on a bank account

• To determine the amount of cash available for investment

• To find errors in the company's financial statements

Which of the following is an adjustment included in calculating adjusted cash balance?

• Daily cash deposits

• Outstanding checks

• Separation of duties

• Pre-numbered checks

What is added to the bank collections in a journal entry?

• Credit memos

• Debit memos

• Bank fees

• NSF checks

What is subtracted from the bank collections in a journal entry?

• Credit memos

• Debit memos

• Bank service charges

• Deposits in transit

Fill in the blank: Bank service charges require a ________ entry.

• journal

• ledger

• cash

• credit

Fill in the blank: Deposits in transit do not require a ________ entry.

• journal

• ledger

• cash

• bank

Why do businesses accept credit cards?

• To encourage more sales

• To delay cash flow

• To avoid processing fees

• To reduce sales revenue