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08 Internal Controls and Bank Reconciliation
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This quiz is about cash and internal controls, specifically focusing on topics such as cash management, bank reconciliation, internal controls over cash, and different scenarios related to cash transactions in a business setting.
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The following statements describe the business’ Cash at bank Account. Which statement is incorrect?
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When trade receivables settle their debts, the Cash at bank Account is debited.
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When cash is deposited directly into the bank account, the Cash at bank account is credited.
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The Cash at bank Account has a credit balance when the cash outflows exceed the cash inflows.
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The Cash at bank Account can have a debit or credit balance.
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reported as a deduction from the current asset section.
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reported as a deduction from cash.
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netted against cash and a net cash amount reported.
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reported as a current liability.
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To maximize profits
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To safeguard assets of the business
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To increase liabilities
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To minimize taxes
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Custody of cash
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Segregation of duties
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Authorizing transactions
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Issuing IOUs to employees
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Errors give rise to unintentional misstatements in the financial statements.
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When one individual is responsible for all related activities, the potential for errors and irregularities is decreased.
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The responsibility for ordering, receiving, and paying for merchandise should be assigned to different individuals.
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Fraud is an unintentional act to misappropriate (steal) assets or misstate financial statements.
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To increase cash flow
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To verify the accuracy of cash receipts
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To check the cash at bank balance against the bank’s record
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To comply with tax regulations
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What is the primary cause of differences between the business’s cash at bank balance and the balance in the bank statement?
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Errors made by the business or the bank
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Timing differences in recorded transactions
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Unauthorized transactions
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Currency exchange fluctuations
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Which of the following is not a reason for the difference in balances between the cash at bank account and the bank statement?
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Cheques issued but not yet presented for payment
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Cheques deposited but not yet credited by the bank
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Deposits made into the bank account not yet recorded by the business
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Deposits made into the bank account and recorded by the business
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Which of the following is NOT a type of difference typically found in bank reconciliation?
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Direct deposits
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Direct payments
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Purchase returns
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Dishonored cheques
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Notification by the bank that a customer’s deposited cheque was returned unpaid requires that the business make the following adjusting entry?
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Dr Trade Receivable; Cr Cash at bank
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Dr Cash at bank; Cr Trade Receivable
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Dr Bank Charges; Cr Trade Receivable
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No adjusting entry is necessary.
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The business’ cash at bank account shows a beginning debit balance of $250, whereas the bank statement shows a beginning credit balance of $750. The difference is due to
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cheques of $1000 not yet presented
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direct deposit of $1000 by a customer
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cheque of $500 that was recently issued to a supplier
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direct payment of $750
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A cheque written by the company for $157 is incorrectly recorded as $175. On the bank reconciliation, the $18 error should be
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added to the balance in the cash at bank account.
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deducted from the balance in the cash at bank account.
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added to the balance per bank reconciliation statement.
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deducted from the balance per bank reconciliation.
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For which of the following errors should the appropriate amount be added to the balance per Cash at bank during a bank reconciliation?
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cheque for $43 recorded as $34 by the depositor
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deposit of $500 recorded by the bank as $50
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a paid cheque for $200 recorded by the bank as $20
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cheque for $35 recorded as $53 by the depositor
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have been recorded on the depositor’s books but not yet in the bank statement.
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have been recorded by the bank but not yet by the depositor.
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have not been recorded by either the bank or the depositor.
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are customers’ cheques that are in the mail but have not yet been received by the depositor.
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On 31 March 2022 Batman Trading received a cheque of $200 which was recorded in the Cash at Bank account, and banked in on the same day. The bank statement for the month of March does not show this $200. How should Batman Trading deal with this $200 in the bank reconciliation statement?
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As an addition to deposits in transit
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As a deduction to deposits in transit
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As an addition to cheques not yet presented
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As a deduction to cheques not yet presented
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