Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 8, Problem 6TP
A bank reconciliation takes time and must balance. An employee was struggling in balancing the bank reconciliation. Her supervisor told her to “plug” (make an unsupported entry for) the difference, record to Miscellaneous Expense, and simply move on. Discuss the internal controls problem with this directive.
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A bank reconciliation takes time and must balance. An employee was struggling in balancing the bank reconciliation. Her supervisor told her to “plug” (make an unsupported entry for) the difference, record to Miscellaneous Expense, and simply move on. Discuss the internal controls problem with this directive.
Evaluate the effectiveness and state the shortcomings of thepreparation of a bank reconciliation by the controller in the manner described in thefollowing statement: “When I reconcile the bank account, the first thing I do is reviewthe sorted list of returned checks and find which numbers are missing. Next I determinethe amount of the uncleared checks by referring to the cash disbursements journal. If thebank account reconciles at that point, I am all finished with the reconciliation. If it doesnot, I search for deposits in transit, checks from the beginning outstanding check listthat still have not cleared, other reconciling items, and bank errors until it reconciles. Inmost instances, I can do the reconciliation in 20 minutes.”
Which of the following statements is true?
A. Window dressing is a practice of closing the books of accounts at the end of the accounting period for a
better financial position and performance.
B. Lapping is a transfer of cash from one bank to another bank.
C. Kiting consists of misappropriating a collection from one customer and concealing this defalcation
when collection is made from another customer.
D. The imprest system required that all cash receipts should be deposited intact and all cash payments
should be made by means of check.
Chapter 8 Solutions
Principles of Accounting Volume 1
Ch. 8 - Which of the following would a fraudster perceive...Ch. 8 - Internal control is said to be the backbone of all...Ch. 8 - What is the best way for owners of small...Ch. 8 - Which of the following is not considered to be...Ch. 8 - There are several elements to internal controls....Ch. 8 - A company is trying to set up proper internal...Ch. 8 - There are three employees in the accounting...Ch. 8 - Which one of the following documents is not needed...Ch. 8 - What is the advantage of using technology in the...Ch. 8 - Which of the following assets require the...
Ch. 8 - Which of the following is true about the...Ch. 8 - The external auditor of a company has certain...Ch. 8 - Petty cash is used to ________. A. avoid having to...Ch. 8 - A company has decided to start a petty cash fund...Ch. 8 - Which of the following items are found on a book...Ch. 8 - Which of the following are found on the bank side...Ch. 8 - What would be a reason a company would want to...Ch. 8 - What would be a reason a company would want to...Ch. 8 - At what point does revenue recognition occur? A....Ch. 8 - What is an example of perceived opportunity as one...Ch. 8 - What is an example of rationalization as one of...Ch. 8 - What is an example of incentive as one of the...Ch. 8 - Why is it important to have a very sound and...Ch. 8 - The information technology departments of all...Ch. 8 - What are the functions of the internal control?Ch. 8 - Discuss the importance of a company having proper...Ch. 8 - What is the role of the Sarbanes-Oxley Act and the...Ch. 8 - Why is it important to have a petty cash fund...Ch. 8 - Is it required to have only one petty cashier or...Ch. 8 - Technology can be used to support a strong...Ch. 8 - What is the purpose of the bank reconciliation?Ch. 8 - What should be done if differences are found...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - The bank reconciliation shows the following...Ch. 8 - The bank reconciliation shows the following...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - Record the following transactions: A. Started a...Ch. 8 - The bank reconciliation shows the following...Ch. 8 - The bank reconciliation shows the following...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - Using the following information, prepare a bank...Ch. 8 - Prepare the journal entry to reconcile the bank...Ch. 8 - On September 1, French company has decided to...Ch. 8 - On May 2 Kellie Company has decided to initiate a...Ch. 8 - Domingo Company started its business on January 1,...Ch. 8 - Prepare a trial balance using the journal entries...Ch. 8 - Inner Resources Company started its business on...Ch. 8 - PA6. 8.4 Prepare a trial balance using the journal...Ch. 8 - Identify where each of the following transactions...Ch. 8 - Which of the following transactions will require a...Ch. 8 - Domingo Company received the following bank...Ch. 8 - Prepare the journal entry required to reconcile...Ch. 8 - Inner Resources Company received the following...Ch. 8 - Prepare the journal entry required to reconcile...Ch. 8 - On June 1 French company has decided to initiate a...Ch. 8 - On July 2 Kellie Company has decided to initiate a...Ch. 8 - Hajun Company started its business on May 1, 2019....Ch. 8 - Prepare a trial balance using the journal entries...Ch. 8 - Lavender Company started its business on April 1,...Ch. 8 - Prepare a trial balance for Lavender Company using...Ch. 8 - Identify where each of the following transactions...Ch. 8 - Which of the following transactions will require a...Ch. 8 - Hajun Company received the following bank...Ch. 8 - Prepare the journal entry required to reconcile...Ch. 8 - Leann Company received the following bank...Ch. 8 - Prepare the journal entry required to reconcile...Ch. 8 - A retail store normally has three people working...Ch. 8 - Visit a favorite eatery. Describe some of the...Ch. 8 - A manufacturing plant was finding a huge increase...Ch. 8 - The vice president of finance asks the accounts...Ch. 8 - Even though technology has improved the internal...Ch. 8 - A bank reconciliation takes time and must balance....Ch. 8 - The bank reconciliation revealed that one deposit...
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Similar questions
- There are several elements to internal controls. Which of the following would not address the issue of having cash transactions reported in the accounting records? A. One employee would have access to the cash register. B. The cash drawer should be closed out, and cash and the sales register should be reconciled on a prenumbered form. C. Ask customers to report to a manager if they do not receive a sales receipt or invoice. D. The person behind the cash register should also be responsible for making price adjustments.arrow_forwardWhich of the following scenarios reduces the risk of an employee fraud? Group of answer choices An accountant being responsible for approving payments to a vendor The bank reconciliation being prepared by an accountant Remittance advices being sent directly to the cashier A sales clerk having access to the cash registerarrow_forwardWhich of the following controls would best prevent the lapping of accounts receivable?a. Segregate duties so that the clerk responsible for recording in the accounts receivable subsidiary ledger has no access to the general ledger.b. Request that customers review their monthly statements and report any unrecorded cash payments.c. Require customers to send payments directly to the company’s bank.d. Request that customers make checks payableto the company.arrow_forward
- Which of the following reflects a weak internal control system? Please explain with full explanation. a. All employees are well supervised. b. A single employee is responsible for comparing a receiving report to an invoice. c. All employees must take their vacations. d. A single employee is responsible for collecting and recording cash.arrow_forwardThe mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department.a. Indicate the weak link in internal control in the handling of cash receipts.b. How can the weakness be corrected?arrow_forwardWhat internal control procedure ( s ) would provide protection against the following threats ? An employee writes off a customer's accounts receivable balance as uncollectible to conceal the theft of subsequent cash payments from that customer .arrow_forward
- Which of the following statements about reconciling items is true? A Debit memoranda should be subtracted from the book side of the bank reconciliation. B An NSF check returned to the bank should be added back to book cash. C If a company discovers errors in its general ledger Cash account, it should call the bank to have the errors corrected. D Adjustments to the bank side of the bank reconciliation should be booked as adjustments to the general ledger Cash account. Please advise, the answer D is correct?arrow_forwardWhich of the following is not a generally recognized internal control activity? Oa. limiting access to computerized accounting records Ob. reducing the cost of hiring seasonal employees Oc. preparation of bank reconciliations on a monthly basis Od. establishment of clear lines of authority to carry out specific tasksarrow_forwardWhich of the following is a good internal control for cash payments? A.Payments to suppliers should be made as quickly as possible B.An experienced accountant should have total responsibility for all cash payment functions. C.Payments should be authorised before they are made D.Supporting documentation should be destroyed immediately after payment to avoid incorrectly twice.arrow_forward
- Which of the following reflects a weak internal control system? Oa. All employees are well supervised. b. A single employee is responsible for comparing a receiving report to an invoice. C. All employees must take their vacations. )d. A single employee is responsible for collecting and recording cash.arrow_forward1. The negative form of accounts receivable confirmation request is particularly useful except when a. Individual account balances are relatively large b. Internal control surrounding accounts receivable is considered to be effective c. A large number of small balances are involved d. The auditor has reason to believe the persons receiving the request are likely to give them consideration 2. The starting point for the verification of the balance in the general ledger account is to obtain a. A bank reconciliation from the client b. The client’s cash account from the general ledger c. A cutoff bank statement directly from the bank d. The client’s year-end bank statementarrow_forwardTo enhance internal control in the bank reconciliation process, the bank reconciliation should be prepared O a. with the assistance of the bank's employees. O b. by the supervisor. O c. entirely within the computerized accounting system. O d. by an employee who does not take part in or record cash transactions.arrow_forward
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