Q: Which of the following is the correct formula for calculating the adjusted cash balance during a bank reconciliation?

$$\text{Adjusted cash balance} = \text{Reconciled balance}$$

Question 1

Which of the following is NOT one of the five primary components of a good internal control system?

Accepted Answer

Financial forecasting

Question 2

A company assigns each cashier responsibility for their own cash drawer. This is an example of which control activity?

Accepted Answer

Assignment of responsibility

Question 3

Which of the following best describes the limitation of internal control systems due to collusion?

Accepted Answer

Employees working together to override controls

Question 4

Which of the following is considered cash according to the general rule provided in the study materials?

Accepted Answer

A money order accepted for deposit by the bank

Question 5

A company receives an electronic funds transfer (EFT) from a customer that was not previously recorded. How should this item be treated in the bank reconciliation?

Accepted Answer

Added to the balance per books

Question 6

Which control activity is best illustrated by the use of computer passwords and security cameras?

Accepted Answer

Physical controls

Question 7

If a company discovers a bank service charge during the bank reconciliation, what is the correct journal entry?

Accepted Answer

Debit Bank Charges Expense, Credit Cash

Question 8

Which of the following is a reason why internal control can only provide reasonable assurance?

Accepted Answer

Human error and management override

Question 9

A company’s bank statement shows a cheque that has not yet been recorded in the company’s books. How should this item be treated in the bank reconciliation?

Accepted Answer

Subtracted from the balance per books

Question 10

Which of the following is an example of fraud as defined in the study materials?

Accepted Answer

Recording expenses as assets

Question 11

Which of the following is a reconciling item per bank in a bank reconciliation?

Accepted Answer

Outstanding cheques

Question 12

If a company’s cash account is in overdraft at year-end, how should it be reported?

Accepted Answer

As bank indebtedness, a current liability

Question 13

Which of the following is the correct formula for calculating the adjusted cash balance during a bank reconciliation?

Accepted Answer

$$	ext{Adjusted cash balance} = 	ext{Reconciled balance}$$

Question 14

Which of the following is NOT a recommended cash management principle?

Accepted Answer

Keep inventory levels high

Question 15

A company finds that a cheque for $$900 was recorded as 980 in $$its books. What is the correct adjustment in the bank reconciliation?

Accepted Answer

Add $80 to the balance per books

Question 16

Which of the following is TRUE regarding journal entries for bank reconciliation?

Accepted Answer

Reconciling items per books must be journalized and posted

Question 17

Which of the following would be considered a cash equivalent?

Accepted Answer

A short-term highly liquid held-for-trading investment

Question 18

Which of the following is a control activity that helps prevent employees from both authorizing and recording transactions?

Accepted Answer

Segregation of duties

Question 19

When preparing a bank reconciliation, which of the following items would be subtracted from the balance per bank?

Accepted Answer

Outstanding cheques

Question 20

Which of the following statements is correct regarding the reporting of cash on the statement of financial position?

Accepted Answer

Cash is listed first in the current assets section

Chapter 7: Internal Control and Cash – Study Notes

Study Guide - Practice Questions

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