Accounting Practice Exam - #2

Which element of the fraud triangle do companies have the greatest ability to eliminate?

• Motivation.

• Rationalization.

• Opportunity.

• Intelligence.

The Sarbanes-Oxley Act requires that companies must:

• Conduct customer surveys each year to ensure satisfaction with products and services.

• Document internal controls and assess their effectiveness each year.

• Pay taxes owed to the Internal Revenue Service by the tax filing date.

• Devise a budget each year to ensure cash outflows are not greater than cash inflows.

Which of the following best describes the goal of internal controls?

• Ensuring the business is profitable.

• Enhancing the health of employees.

• Improving the accuracy and the reliability of financial information.

• Ensuring the compliance with tax regulations.

What is the concept behind separation of duties in establishing internal controls?

• The company's financial accountant should not share information with the company's tax accountant.

• Duties of middle-level managers should be clearly separated from those of top executives.

• Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

• The external auditors of the company should have no contact with managers while the audit is taking place.

Which of the following sales would typically be reported as a cash sale?

• Sale in exchange for office supplies received.

• Sale in exchange for equipment received.

• Sale on account.

• Sale with credit card.

Which of the following would NOT represent good controls over cash disbursements?

• Periodically verify amounts shown in the debit card and credit card statements against purchase receipts.

• The employee verifying the accuracy of the debit card and credit card statements should not also be the employee responsible for actual purchases.

• Set maximum purchase limits on debit cards and credit cards.

• Employees responsible for making cash disbursements should also be in charge of cash receipts.

Bank balance $8,000 Checks outstanding $5,800 Note collected by the bank $1,500 Service fee $20 Deposits outstanding $4,000 NSF check $300 What is the correct cash balance that should be reported in the company's balance sheet at the end of the year?

• $10,200.

• $7,400.

• $6,200.

• $6,160.

At the end of the month, employees have made the following expenditures from the petty cash fund and with company-issued credit cards. None of these transactions has been recorded previously. Supplies (petty cash) $50 Delivery (petty cash) $75 Advertising (credit card) $1,100 Equipment (credit card) $4,200 Accounting for these employee purchases would include a:

• Credit to Cash for $125.

• Debit to Accounts Payable for $5,300.

• Credit to Cash for $1,225.

• Credit to Accounts Payable for $5,425.

A company's cash balance is reported in which two financial statements?

• Income statement and statement of cash flows.

• Balance sheet and statement of cash flows.

• Income statement and balance sheet.

• Balance sheet and statement of retained earnings.

Which of the following best describes credit sales?

• Cash sales to customers that are new to the company.

• Sales to customers using credit cards.

• Sales to customers on account.

• Sales with a high risk that the customer will return the product.