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08 Internal Controls and Bank Reconciliation

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?


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?


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?


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?


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?


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


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


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?


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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If you didn’t pass the quiz on cash and internal controls, don’t be discouraged. Use this as an opportunity to identify areas where you may need to focus more attention and study.
Review the concepts related to cash management, bank reconciliation, and internal controls over cash.
Seek additional resources or assistance if needed, and try again. With dedication and effort, you can improve your understanding and succeed in future quizzes.
Review the concepts related to cash management, bank reconciliation, and internal controls over cash.
Seek additional resources or assistance if needed, and try again. With dedication and effort, you can improve your understanding and succeed in future quizzes.

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