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Unit 2 Practice Quiz

1. Which one of the following below is not a factor that influences a business's control environment?

Proofs and security measurers

2. A firm's internal control environment is not influenced by

Monitoring policies

3. An element of internal control is

Risk assessment

4. A necessary element of internal control is

Information and communication

5. An example of a preventive control is

Separation of the Purchasing Department and Accounting Department personnel

6. Procedures designed to protect cash from theft and misuse from the time it is received until it can be
deposited in a bank are called

Preventive controls

7. A special form on which is recorded pertinent data about a liability and the particulars of its payment is called
a (n)

Voucher

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

Independent internal verification

9. Which of the following is not an internal control activity for cash?

The functions of record keeping and maintaining custody of cash should be combined

10. The term cash includes

Coins, currency (paper money), checks and money orders, and money on deposit that is available for
unrestricted withdrawal

11. A debit or credit memo describing entries in the company's bank account may be enclosed with the bank
statement. An example of a credit memo is

A promissory note left for collection

12. Following the completion of the bank reconciliation, an adjusting entry was made that debited cash and
credited Interest Revenue. Therefore the bank reconciliation must have included an item that was
Added to the balance per company's records

13. The bank reconciliation

Is part of the internal control system

14. Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation,
the item is

A deduction from the balance per company's records

15. Accompanying the bank statement was a debit memo for bank service charges. What entry is required in the
company's accounts?

Debit Miscellaneous Administrative Expense; credit Cash

16. The amount of deposits in transit is included on the bank statement as a (n)

Addition to the balance per bank statement

17. The amount of the outstanding checks is included on the bank reconciliation as a (n)

Deduction from the balance per bank statement

18. Which of the following items that appeared on the bank reconciliation did not require an adjusting entry?

Deposits in transit

19. A $100 petty cash fund contains $89 in petty cash receipts and $7.50 in currency and coins. The journal
entry to record the replenishment of the fund would include a

Debit to Cash Short and Over for $3.50

20. Cash equivalents include

Money market accounts and commercial paper