ADAMSON UNIVERSITY

Intermediate Accounting 1 – (CASH) Prelims Assignment 2

Prof. Judith Francisco – Luna

Name _____________________________________________ Schedule ____________ Date ________________

FAMILY NAME FIRST NAME M.I.

I. TRUE-FALSE
Write in CAPITALS the word TRUE if the statement is correct or the word FALSE if the statement is incorrect.
___________ 1. The objective of internal control is to ensure efficient operation.
___________ 2. One of the best protection against theft is to hire only close relatives.
___________ 3. A specific function should be assigned to two or three employees to prevent fraud and
manipulations.
___________ 4. The voucher system is used by companies to control cash disbursements.
___________ 5. The bank reconciliation statement is an internal control feature that checks on the cash
transactions of the company.
___________ 6. The principal advantage of a voucher system is that it provides strong internal control over the
making of expenditures and the payment of liabilities.
___________ 7. A voucher register is used to record all expenditures whereas a purchases journal is usually
limited to recording purchases of merchandise on credit.
___________ 8. The main purpose of the voucher is to control the inflow of cash.
___________ 9. A practice designed to present a more favorable financial condition than is actually the case is
referred to as “internal control”.
___________ 10. Cash items may include undeposited collections and postdated checks.
II. Write the CAPITAL LETTER of the best answer for each of the following items.
_____ 1 . Cash on hand and in bank on the statement of financial position excludes
A. checks drawn before the reporting date but held for later delivery to creditors.
B. time deposits.
C. US dollars deposited in a foreign currency depository account.
D. cash reserved for the acquisition of fixed assets.
_____ 2. As of December 31, 2019, DEF Corp. had various checks and papers in its safe. Which item should not
be included in its cash account on its statement of financial position?
A. US$15,000 cash.
B. a past-due promissory note issued in favor of DEF by its President.
C. XYZ Inc.’s December 5, 2019 P15,000 check payable to DEF.
D. DEF’s December 28, 2019 P50,000 check payable to LMN, a DEF supplier.
_____ 3. Which of the following is not an aid to the effective control of cash disbursements?
A. Requiring all checks to be pre-numbered consecutively.
B. Requiring all checks to be signed by one person and countersigned by another.
C. Requiring approved supporting documents for each check issued.
D. Requiring disbursements to be done in cash from daily receipts prior to making bank deposits to
minimize handling of cash.
_____ 4. A good internal control system provides procedures for
A. making payments from the day’s collections.
B. allowing one person to receive cash and to record cash receipts.
C. preparing regular bank reconciliation
D. delaying the deposit of cash collections because no one knows for sure the account to be credited.
_____ 5. In a bank reconciliation that attempts to reconcile the bank balance to the correct cash balance, the
following items would affect reconciliation in what way?
Outstanding checks Deposit in transit
A. Added Added
B. Deducted Added
C. Added Deducted
D. Deducted Deducted
_____ 6. An internal control system where obligations by the company should be liquidated only by checks.
A. voucher system C. current account
B. check system D. outstanding check
_____ 7. A plan of organization and all the methods and procedures taken by the company to safeguard its
assets, ensure compliance with company’s policies, ensure accurate and reliable data and records, evaluate
performance of personnel to ensure efficiency in operation.
A. imprest system C. voucher system
B. internal control D. petty cash fund operation
_____ 8. Which of the following is true of a voucher system?
A. All major expenditures, including cash transactions for payment of rent and utilities expense,
would first be a credit to Vouchers Payable before a payment is made.
B. Transactions are first entered in the check register, and later, when payment is made, in the
voucher register.
C. The check register replaces the cash receipts journal.
D. The voucher register contains a debit column for Vouchers Payable.
_____ 9 . Which of the following shall not be presented as part of an entity’s Cash balance?
A. Foreign currency deposits
B. Undeposited customers’ checks
C. Bank deposit segregated for acquisition of equipment
D. Bank deposit segregated for payment of salaries.
_____ 10. Which of the following is not considered cash for financial reporting purposes?
A. Petty cash funds and change funds
B. Money orders, travelers’ checks, and personal checks
C. Coin, currency, and available funds
D. Postdated checks and IOUs
_____ 11. A bank overdraft, should be
A. reported as a deduction from the current asset section.
B. reported as a deduction from cash.
C. netted against cash and a net cash amount reported.
D. reported as a current liability, when there is no valid basis for offsetting against another bank
account.
_____ 12. The amount reported as “Cash” on a company’s statement of financial position normally should
exclude
A. petty cash fund
B. post-dated checks issued by the company
C. post-dated checks payable to the company
D. undelivered checks to the payee written and signed by the company.
_____ 13. Which of the following is not a basic characteristic of a system of cash control?
A. Use of a voucher system
B. Combined responsibility for handling and recording cash
C. Daily deposit of all cash received
D. Internal audits at irregular intervals.
_____ 14. Deposits held as compensating balances
A. usually do not earn interest.
B. if legally restricted and held against short-term credit may be included as cash.
C. if legally restricted and held against long-term credit may be included among current assets.
D. if legally restricted and held against short-term credit should not be included in the cash balance
but are reported among current assets.
_____ 15. A bank may return a check to the maker for all of the following reasons except
A. the amount of the check is too small. C. the check has been altered.
B. the signature is missing. D. the maker’s account has been closed.
_____ 16. If the cash balance shown in a company’s accounting records is less than the correct cash balance,
and neither the company nor the bank has made any errors, there must be
A. deposits credited by the bank but not yet recorded by the company.
B. outstanding checks.
C. bank charges not yet recorded by the company.
D. deposit in transit.
_____ 17. The following cash funds are considered as cash except
A. Petty Cash Fund C. Payroll Fund
B. Bond Sinking Fund D. All items are considered Cash
_____ 18. To be reported as cash and cash equivalent, the cash item must be
A. Deposited in the Bank C. Allocated for the purchase of Land and Building
B. Unrestricted for the use in current operation D. Set aside for the payment of long term debts.
_____ 19. Complete the phrase: A bank reconciliation
A. Is Done Every Year End
B. Is Optional
C. Determines any timing differences and errors that may have been the cause of any
discrepancies between the Books and the Bank Statements
D. Is done by the Accountant to determine any errors made by the Bank
_____ 20. Cash in foreign currency is valued at
A. Face value
B. Estimated realizable value
C. Current exchange rate
D. Current exchange rate reduced by allowance for expected decline in peso value.