Trust Falls? Yeah… Not in Accounting
This principle states that no one employee should be in charge of both recording transactions and handling assets.
What is separation of duties?
A check you wrote that has not been cashed is known as a(n) ____________________ check
What is outstanding
Debit: Petty Cash
Credit: Cash
"The company doesn't pay enough in X-mas bonuses" would be an example of what corner of the fraud triangle.
What is rationalization?
Cash is easily hidden and moved. Internal controls protect cash and meet three guidelines:
1.Handling cash is separate from recordkeeping of cash.
2.Cash receipts are promptly deposited in a bank.
3. Cash payments are made by ________
check or eft
Human error is a limitation of internal control - Name one of the three human errors categories:
Carelessness
Misjudgment
Confusion
On a bank reconciliation, a bank fee for check printing not yet recorded by the company is deducted from?
What is the book balance of cash.
Small payments for items such as shipping fees, minor repairs, low-cost supplies, pizza, donations, etc.
An internal control weaknesses in a business presents what corner of the fraud triangle?
Opportunity
Cash and similar assets are called ___________ assets because they can be readily used to pay current liabilities.
What are liquid
This act requires managers and auditors of public companies to document and certify internal controls.
What is the Sarbanes–Oxley Act (SOX)?
If the cash register tape shows $550 but the drawer has $555, this account will be debited.
What is Cash Over and Short?
To increase the petty cash fund from $500 to $700 this is the transaction.
Debit Petty Cash: $200
Credit Cash: $200
These _____________ test the company’s financial records and evaluate the effectiveness of internal controls.
What are auditors
Short-term, highly liquid investments are called Cash E_____________
Equivalents
2 limitations of internal controls are human error and human _______
Fraud
A check that the bank has cashed is known as a ________________________________ check
Cleared or Canceled check
You had a $500 petty cash fund. At end of month there is a receipt for $100 for advertising expense and $399 in the box. This is the transaction:
Debit: Advertising Expense $100
Debit: Cash Over and Short $1
Credit: Cash $101
What are the 3 corners of the fraud triangle?
Opportunity, pressure, and rationalization
B________________________ is a new, more secure type of accounting ledger.
1.Prevents modification without detailed record of changes.
2.Changes cannot be destroyed or hidden.
Blockchain
This concept says the cost of internal control should not exceed the expected benefits.
What is the cost-benefit constraint?
An outstanding check would be (added/deducted) from the (bank/book) statement.
deducted from the bank statement
At the end of the day, the cash register tape shows $1,100 in cash sales but the count of cash in the register is $1,135. The proper entry to account for this excess is:
Debit: Cash $1,135
Credit: Sales $1,100
Credit: Cash Over and Short $35.
When a company purchases an insurance policy on an employee in case they commit theft, this is called B________. It also discourages theft because a B________ employee knows they will pursue theft charges.
What is bonded
A V_____________ system establishes procedures for:
1.Verifying, approving, and recording liabilities for eventual cash payments.
Issuing checks for payment of verified, approved, and recorded liabilities
Voucher System