Book 2 - Chapter 25

Multiple Choice
1.	d Bank errors must be an adjustment to the bank balance, not the book balance, even though these items can be added or subtracted to the book balance in such a way as to make the reconciliation balance.
2.	b
3.	d
4.	c
5.	b An outstanding check, regardless of when it was written, has already reduced the book balance but has never yet been recorded by the bank, so it must be subtracted from the bank balance on every reconciliation (until the check clears).
6.	c
7.	a Whether the classification is long term or short term depends on the type of restriction.
8.	c
9.	a Small businesses with just a few employees are very vulnerable to theft.
10.	d
11.	a
12.	b In addition to duties being clearly defined and assigned, critical duties must also be separated.
13.	c Bank reconciliations help control both payments and receipts.
14.	d
15.	b If the fund is not replenished, the expenses don’t get recorded in the journal!
16.	c The Petty Cash account is debited only when the fund is established or an increase in the fund is approved and made. It is credited only when terminated or a decrease in the fund is approved and made.
17.	d (a) and (b) have already been recorded, and (c) is an adjustment the bank makes to its books.
18.	d Safeguarding assets is the primary purpose. However, internal control is also intended to promote efficiency, improve the accuracy of financial statements, and encourage adherence to company policies. However, it cannot ensure these things will occur.
19.	a The voucher authorizes payment, but other documents validate and verify before the voucher is completed.
20.	b
21.	b In a voucher system, every potential payment is first recorded as a liability after a voucher is completed, and this liability is usually called “Vouchers Payable.” The Vouchers Payable liability is recorded in the voucher register. On the balance sheet the name is changed to “Accounts Payable” which is more familiar.

Learning Goal 25

SOLUTIONS

Learning Goal 25: Report and Control Cash

Home

Home || Book Publications || Professor’s Office || Student Info & Resources || Useful Links

Worthy & James Publishing is a provider of basic accounting books covering fundamental accounting principles, business accounting, and business math. Topics in financial accounting and business accounting covered include the balance sheet, the income statement, financial ratios, and bank reconciliation.