Q: Which formula is used to measure the liquidity of receivables, and what does it represent?

Days' Sales Uncollected: $$\left(\frac{\text{Accounts Receivable}}{\text{Net Sales}}\right) \times 365$$; it represents the number of days it takes to collect receivables.

Q: What is the correct formula for Days' Sales Uncollected?

$$\left(\frac{\text{Accounts Receivable}}{\text{Net Sales}}\right) \times 365$$

Question 1

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To explain the difference between the book balance and the bank statement balance and compute the adjusted cash balance.

Question 2

A company’s internal control system is designed to achieve all of the following EXCEPT:

Accepted Answer

Guarantee profitability

Question 3

Which formula is used to measure the liquidity of receivables, and what does it represent?

Accepted Answer

Days' Sales Uncollected: $$\left(\frac{	ext{Accounts Receivable}}{	ext{Net Sales}}ight) 	imes 365$$; it represents the number of days it takes to collect receivables.

Question 4

Which of the following is NOT a principle of internal control?

Accepted Answer

Maximize sales revenue

Question 5

A company discovers a $90 error that understated the book balance during its bank reconciliation. What is the correct journal entry?

Accepted Answer

Dr. Expense $$90 / Cr. Cash 90$$

Question 6

Which component of the COSO framework focuses on identifying, analyzing, and managing risk factors?

Accepted Answer

Risk Assessment

Question 7

A company’s petty cash fund is officially $$250. At month-end, the box contains 40 in $$cash and receipts totaling $205. What is the correct replenishment entry?

Accepted Answer

Debit expenses $$205, credit Cash 210$$, debit Cash Over and Short $5 (shortage)

Question 8

Which of the following best illustrates the separation of duties principle in internal control?

Accepted Answer

The person who handles cash does not record cash transactions.

Question 9

Which step in the voucher system comes immediately after the receiving report?

Accepted Answer

Invoice

Question 10

A company’s bank statement shows a balance of $$2,500. There are deposits in transit of 600 $$and outstanding checks totaling $400. What is the adjusted bank balance?

Accepted Answer

$$2,700$$ ($$2,500 + 600$$ - $$400)$$

Question 11

Which of the following is a limitation of internal control systems?

Accepted Answer

Human error due to carelessness or confusion

Question 12

Which account is used to record discrepancies when replenishing petty cash?

Accepted Answer

Cash Over and Short

Question 13

What is the correct formula for Days' Sales Uncollected?

Accepted Answer

$$\left(\frac{	ext{Accounts Receivable}}{	ext{Net Sales}}ight) 	imes 365$$

Question 14

Which of the following is a cash equivalent?

Accepted Answer

A short-term investment readily convertible to a known cash amount, usually within 90 days.

Question 15

Which scenario best demonstrates the fraud triangle?

Accepted Answer

An employee under financial pressure rationalizes stealing cash because they believe the company won’t notice, and they have access to the cash drawer.

Question 16

When replenishing the petty cash fund, which account should NOT be touched according to the rules?

Accepted Answer

Petty Cash

Question 17

Which of the following is a technological control used to improve internal control?

Accepted Answer

Two-factor authentication (2FA)

Question 18

A company receives a bank statement showing a $$150 NSF check and a 20 $$printing fee. What is the correct journal entry for these items?

Accepted Answer

Dr. Accounts Receivable $$150 / Cr. Cash 150$$; Dr. Bank Fee Expense $$20 / Cr. Cash 20$$

Question 19

Which document is used by purchasing to place an order with a vendor?

Accepted Answer

Purchase order

Question 20

Which rule applies to the Petty Cash ledger account according to the 'Lockbox' rule?

Accepted Answer

The Petty Cash ledger account always equals the official fund size, regardless of the physical cash inside.

Chapter 8: Internal Control, Cash, and Banking — Comprehensive Study Notes

Guida di studio - Domande di pratica

Study guide - Flashcard