Solution Manual for Financial Accounting , 12th Edition

Preview (27 of 87 Pages)

100%

Purchase to unlock

Loading page image...

Chapter 1-The Financial StatementsDirected ReadingWorksheetAnswer KeyPart I: Explain why accounting iscritical to businesses(LO1)1.What are financial statements?Business documents companies use to report the results of their activities topeople and groupsthat can include managers, investors, creditors, and regulatory agencies2.List the basic financial statements.a. Income statementb. Statement of retained earningsc. Balance sheetd. Statement of cash flows3.What does the word net refer to in accounting?An amount after a subtraction4.What is net income (profit)?The excess of revenues (net sales) over expenses5.What were net sales for The Walt Disney Company, for its year ended October 1, 2016? For itsyear ended October 3, 2015? On what statement do you find this information?2016: $55,632million2015: $52,465millionIncome Statement6._____________________ is an information system that measures business activities, processesdata into financial statements and reports, and communicates results to decision makers.Accounting7.What is the accounting cycle?The process by which a company’s financial statements are prepared8._____________________ is a mechanical part of accounting, just as arithmetic is a part ofmathematics;accounting as a field is much more than this mechanical part.Bookkeeping9.Who uses accounting information?a. Individualsb. Investors and creditors

Loading page image...

c. Regulatory bodiesd. Nonprofit organizations10.What two branches of accounting are based on whether the user is external or internal?a. Financial accounting (external)b. Managerialaccounting (internal)11.A _____________________ form of business organization consists of a single owner and theowner is personally liable for all the business’s debts.Proprietorship12.Income from the ______________________ form of business organization “flows through” tothe owners; each owner can legally bind all partners into unlimited debt.Partnership13.When organized as a _____________________, the owners are not personally liable for thebusiness’s debts and the business’s income “flows through” to the owners to be taxed at theowners’ own tax rates.Limited-Liability Company14.Although its advantages include the ability to raise large sums of capital and the no personalliability for its owners, one potential disadvantage of the _______________________ form ofbusiness organization is that its income is subject to double taxation.Corporation15.Who (or what) ultimately controls a corporation?Stockholders or shareholders who own stock in the corporationPart II: Explain and apply underlying accounting concepts, assumptions, and principles(LO2)16.Two professional frameworks for the measurement and disclosure of financial information are:a. Generally AcceptedAccounting Principles (GAAP)b. International Financial Reporting Standards (IFRS)17.What regulatory bodies formulate the standards for each respective framework in Question 16above?Financial Accounting Standards Board (FASB); International Accounting Standards Board (IASB)18.Fill in the conceptual foundation of accounting in the following diagram. Also draw arrowswhere appropriate to show relationships.

Loading page image...

19.In your own words, describe the difference between relevance and faithful representation.Relevancemeans that the information could change the outcome or make a decision makerchose a different path. If information would have no impact on the decision, then it is notrelevant. If the information could change the decision makers mind, it is relevant.Faithful representationmeans that the information is accurate. Faithful representation makesthe information reliable for decision makers to use it.20.List and describe the four enhancing qualitative characteristics for accounting information.a.Comparability:capable of being compared with information from other companies in thesame periodb.Verifiability:capable of being checked for accuracy, completeness, and reliabilityc.Timeliness:made available to users early enough to help them make decisionsd.Understandability:transparent and clear enough so that itwould make sense to thereasonably informed user of information21.List and describe the four accounting assumptions/principles.a.Entity Assumption:This is the idea that the entity (organization or person) stands apart as aseparate economic unit. It is to keep entities and their affairs separate from others.b.Continuity (Going-Concern Assumption):This says that a business should stay in businesslong enough toconvert its inventories and receivables to cash, pay off liabilities regularly, and

Loading page image...

continue operations in the future.c.Historical Cost Principle:This states that assets should be recorded at the cost paid for themin cash and noncash compensation on the date of purchase.d.Stable-Monetary-Unit Assumption:This ignores inflation and change in purchasing power toassume that the value of the dollar is stable over time. This helps with comparability from yearto year.22._________________ is the amount that the business could sell the asset for, or the amount thatthe business could pay to settle the liability.Fair value23.Why did the International Accounting Standards Board (IASB) develop International FinancialReporting Standards (IFRS)?The purpose was to create a uniform set of principles across the developed world and makecomparability of financial results simple and inexpensive.Part III:Apply the accounting equation to business organizations (LO3)24.Assets are economic resources that are expected to produce a _____________________ in thefuture. Liabilities are debts that are payable to _____________________. Owners’ equityrepresents the _____________________ claims of a business.Benefit;Outsiders/Creditors; Insider25.What is the accounting equation?Assets = Liabilities + Owners’ (Stockholders’) Equity26.________________ are liquid assets that can be readily converted to cash. Give 2 examples.Cash equivalentsCertificate of deposit, U.S. treasury bill27.Liabilities payable beyond __________________ from the date of the financial statements arelong-term. Liabilities payable within __________________ from the date of the financialstatements are short-term.One year;One year28.What are the two main subparts of stockholders’ equity and what is the difference betweenthem?Paid-in capital:the amount the stockholders have invested in the corporationRetained earnings:the amount earned by income-producing activities and kept for use in thebusiness

Loading page image...

The main difference is that paid-in capital comes from the stockholders while retained earningsis from the operations of the business.29.Dividends (ARE or ARE NOT) expenses. They (NEVER or ALWAYS) affect net incomeARE NOT; NEVER30.When a company’s total revenues exceed total expenses, what is the result? When totalexpenses exceed total revenues?Net income/net earnings/net profit; Net loss31.How is retained earnings calculated?Retained earnings = Revenues–Expenses–DividendsOrRetained earnings = Netincome (net loss)–DividendsPart IV:Construct financial statements and analyze the relationships among them(LO4)32.You can determine how well the company performed during the year by looking at its___________________. You can determine a company’s financial position by looking at its___________________.Income statement;balance sheet33.A company’s fiscal year always corresponds to a calendar year (January 1—December 31). TRUEor FALSEFalse34.An income statement reports two main categories. What are they?Revenues and gains; expenses and losses35.What is the single most important item in the financial statements?Net income36.Selling, general, administrative, and other expenses are the costs of everyday operations thatare not directly related toperforming services or selling products. TRUE or FALSETrue37.Income taxes are not taken into consideration on the income statement. TRUE or FALSEFalse38.What does the statement of the retained earnings show about a company?The statement of retained earnings shows the portion of net income that a company hasretained over the years. If the company has been profitable, it will have a positive balance in

Loading page image...

retained earnings. If it has had losses, then its retained earnings will be in a deficit. Thestatement of retained earnings also shows if the company has distributed dividends.39.Who decides whether to pay a dividend to the stockholders?The board of directors40.List the three items (sections) on a balance sheeta.Assetsb.Liabilitiesc.Stockholders’ Equity41.Put the following assets in order of liquidity: equipment, cash, inventory, and short-terminvestments.Cash, Short-term investments, Inventory, Equipment42.When the term “net” is used on a financial statement regarding property and equipment, itmeans that the historical acquisition cost of the assets has been reduced by ________________________________________.Accumulated depreciation43.____________________ assets have no physical substance; you can neither see nor touch them.Intangible44.Unearned royalties (revenues) represents cash received in advance of performing services orshipping goods and is a liability account. TRUE or FALSETrue45.Describe additional paid-in capital in your own words.Additional paid-in capitalis the excess amount over par shareholders pay for securities of acompany.46.____________________ stock represents amounts paid by the company to repurchase its ownstock.Treasury47.Operating activities show how the company operates by selling ___________ and___________to customers. Investing activities show a company’s investment in ______-______ ___________.Financing activities include _______________________________________________.Goods; services; long-term assets; issuing stock, paying dividends, borrowing, and repayingborrowed funds.48.How is a cash payment indicated on the statement of cash flows?They are enclosed by parentheses to show a negative amount.

Loading page image...

49.If you were considering investing in The Walt Disney Company, what should you look for?Students’ answers will vary. Possibilities include:•Can the company sell its services and products?→Look at revenue on the income statement•What are the main income measures and trends?→Calculate and analyze gross profit,operating income, and net income•What percentage of revenue ends up as profit?→Divide net income by sales revenue•Can the company pay its current and long-term liabilities?→Compare assets to liabilities onthe balance sheet (both current and long-term)•Where is the company’s cash coming from and how is it being used?→Examine the statementof cash flowsPartV:Evaluate business decisions ethically(LO5)50.Describe ethics in your own words.Answers will vary. Ethics are shaped by our own background and experiences. They arelikeourmorals. What is legal may not always be the most ethical thing to do.51.List and describe the three types of factors that influence business and accounting decisions.a. Economic factor: the decision should be madetomaximize economic benefits to the decisionmakerb. Legal factor: based on the proposition that free societies are governed by lawsc. Ethical factor: recognizes that while certain actions might be both economically profitable andlegal, they still may not be right52.Ethics is a practice that does not have to be taken seriously in accounting. TRUE or FALSEFalse53.The four core values of the Business Ethics Leadership Alliance include __________________,transparency, __________ ________, and accountability.Legal compliance; conflict identification

Loading page image...

54.A good decision framework for making ethical judgements would be the following:•Ask yourself, what is the issue?•Identify who the stakeholders are and what theconsequence of the decision would beto each of them.•Weigh the alternatives.•Make the decision and prepare yourself to deal with the consequences.This can be simplified into three questions. (1) Is the action legal? (2) Who will be affected andhow? (3) How will this decision make me feel after? How would it make me feel if my familyreads about it in the newspaper?55.List the basic principles of the American Institute of Certified Public Accountants Code ofProfessional Conduct.a.Responsibilities principleb.Public interest principlec.Integrity principled.Objectivity and independence principlee.Due care principlef.Scope and nature of services

Loading page image...

Chapter 2-Transaction AnalysisDirected Reading WorksheetAnswer KeyPart I:Recognize a business transaction and the various types of accounts in which it can be recorded(LO1)1.A(n) __________________ is any event that has afinancial impact on a business and can bemeasured reliably.Transaction2.What two things must happen for an event to be considered a transaction?1.It gives something2.It receives something in return.3.An account is the record of all the changes in anasset, liability or stockholders’ equity during aperiod. TRUE or FALSETrue4.What is the definition of an asset?An economic resource that providesa future benefit for a business5.Listsevenasset accounts that a company is likely to have.1.Cash2.Accounts receivable3.Notes receivable4.Inventory5.Prepaid expenses6.Investments7.Property, Plant and Equipment6.What is the definition of a liability?Liabilities are debt.Amounts owed to other parties (payables).7.List the three most common types of liabilities1.Accounts payable2.Notes payable (borrowings)3.Accrued liabilities8.What is stockholders’ equity?The owners’ claims to the assets of a corporation

Loading page image...

9.What five main types of accounts are in stockholders’ equity?1.Common stock2.Retained earnings3.Dividends4.Revenues5.ExpensesPartII:Analyze the impact of business transactions onthe accounting equation(LO2)10.Every transaction of the business affects its financial statements. TRUE or FALSETrue11.For eachitem, indicate the impact of that transaction on assets, liabilities, and equity. Assumethat all transactions, unless stated otherwise, are in cash.TransactionAssets(increase + ordecrease-)=Liabilities(increase + ordecrease-)+Equity(increase + ordecrease-)1.Received $50,000 cash and issuedstock to the owners50,000=+50,0002.Paid $40,000 cash for land(40,000)+40,000=+3.Bought $3,700 of supplies onaccount3,700=3,700+4.Received $7,000 cash fromcustomers for service revenueearned7,000=+7,0005.Performed services for customers onaccount, $3,0003,000=+3,0006.Paid cash expenses: rent, $1,100;employee salary, $1,200; utilities,$400(2,700)=+(2,700)

Loading page image...

7.Paid $1,900 on theaccount payablecreated in transaction 3(1,900)=(1,900)+8.Major stockholder paid personalfunds to remodel home, not abusiness transactionN/A=N/A+N/A9.Received $1,000 on account+1,000(1,000)=+10.Sold land for cash at theland’s costof $22,000+22,000(22,000)=+11.Declared and paid a dividend of$2,100 to the stockholders(2,100)=+(2,100)12.What effect do revenues have on stockholders’ equity? What effect do expenses have onstockholders’ equity?Revenues increase stockholders’ equity.Expenses decrease stockholders’ equity.13.What effect does a dividend declaration have on retained earnings?Dividends decrease retained earnings14.Fill in the equation for the statement of retained earnings:Beginning retained earnings+ Net income-Dividends= Ending retained earnings15.What line item is carried from the Income Statement to the Statement of Retained Earnings?What line item is carried from the Statement of Retained Earnings to the Balance Sheet?Net incomeEnding retained earningsPart III: Analyze the impact of business transactions on accounts(LO3)16.Describehowaccounting is based on a double-entry system?

Loading page image...

The dual effects of each transaction are always recorded. Every transaction affects atleast two accounts.17.How does the letter T represent an account?The vertical line in the T splits the account into two halves. The account title appears onthetop of the T.18.The left side of each T-account is the ____________ side, and the right side is the ____________side.Debit; credit19.Describe how debits and credits affect asset, liability, and stockholders’ equity accounts.Debits increase assets and decrease liabilities and stockholders’ equity. Credits decreaseassets and increaseliabilities and stockholders’ equity.20.The amount remaining in an account is called its _________________.Balance21.How do debits and credits affect dividend, expense, and revenue accounts?Debits increase dividends and expenses but decrease revenues. Credits decreasedividends and expenses but increase revenues.PartIV:Journalizetransactionsand postjournal entries to the ledger (LO4)22.What is the chronological record of transactions that accountants use?A journal23.List the three steps of thejournalizing process.1.Specify each account affected by the transaction and classify each account by type.2.Determine whether each account isincreased or decreased by the transaction. Use therules of debit and credit to increase or decrease each account.3.Record the transaction in the journal, including a brief explanation. The debit side isentered on the left margin, and the credit side is indented to the right.24.The _________________ is a grouping of all the T-accounts, with their balances.Ledger25.What does “posting” mean?Posting means to copy data (amounts) from the journal to the ledger.

Loading page image...

26.Post the following transactions to the ledger accounts. Use t-accounts to represent the ledgeraccounts. (Transactions 1-4 from question 13)1.Received$50,000 cash and issued stock to the owners2.Paid $40,000 cash for land3.Bought $3,700 of supplies on account4.Received $7,000 cash from customers for service revenue earned27.The difference between an account’s total debits and its total credits is denoted as what in theT-account?BalPart V: Construct and use a trial balance(LO5)28.Describe a trial balance, including its purposeA trial balance lists all accounts with their balances. It starts with assets, then liabilitiesand stockholders’ equity. The trial balance summarizes all the account balances andproves whether total debits equal total credits.The trial balance facilitates in thepreparation of the financial statements.29.What formula could you use to analyze the cash account and compute cash payments for theperiod if you were unsure of the amount of cash payments?Cash payments = Beginning balance + Cash receipts–Ending balance30.What three strategies couldhelp you detect and correct accounting errors made during theperiod?1.Search the records for a missing account.2.Divide the out-of-balance amount by 2.3.Divide the out-of-balance amount by 9.

Loading page image...

31.Organizations use a _______________________tolist all their accounts and account numbers.Chart of accounts32.Describe what an account’s “normal balance” means.Normal balance is the side of the account where increases are recorded.Toincrease anasset,you debit it, therefore assets have a normal debit balance.33.Indicate the normal balance for each of the following types of accounts:1.Assets–debit2.Liabilities–credit3.Stockholders’ equity–overall–crediti.Common stock–creditii.Retained earnings–creditiii.Dividends–debitiv.Revenues–creditv.Expenses–debit

Loading page image...

Chapter 3-Accrual Accounting & IncomeDirected Reading WorksheetAnswer KeyPart I: Explain how accrual accounting differs from cash-basis accounting1.What twomethods may be used in accounting? Which one is required by Generally AcceptedAccounting Principles (GAAP)?1.Accrual basis2.Cash-basisThe accrual basis is required by GAAP.2.Under accrual accounting,a business records revenuewhen _______Earned__________ andexpenses when _____Incurred____________.3.What cash transactions does accrual accounting record?•Collecting cash from customers•Receiving cash from interest earned•Paying salaries, rent and other expenses•Borrowing money•Paying off loans•Issuing stock4.Which of the followingnoncash transactions does accrual accounting record?A.Sales and purchases on accountB.Usage of prepaid rent, insurance, and suppliesC.Earning of revenue prior to cash collectionD.Accrual of expenses incurred but not yetpaidE.All of the above

Loading page image...

5.In your own words, describe the time-period concept.Student answers will vary. The time-period concept ensures that accounting informationis reported at regular intervals. The time-period concept is necessary because business’sneed regular progress reports. They certainly cannot wait until liquidation tomeasureincome; therefore, the time-period concept must be utilized.6.How long is the basic accounting period?One year7.Virtually all companies prepare annual financial statements. At what other interim periods docompanies often prepare financial statements for?Month, quarter (three months) or a semiannual period (six months)Part II: Apply the revenue and expense recognition principles8.What two issues does therevenue principle deal with?1.When to record (recognize) revenue2.What amount of revenue to record9.What is the general rule for when revenue should be recognized?Revenue should be recognized afterithas beenearned–when the business transfersthe promised goods or services to the customer.10.What amount of revenue should be recorded?The amount of cash or its equivalent that is transferred from the customer to the seller11.In your own words, describe the expense recognition principle.Student answers will vary. The expense recognition principleis the basis forrecordingexpenses. Expenses are costs incurred during the process of creating revenue thatprovide no future benefit to the company. Expenses should be recognized against therelated revenues of that period.

Loading page image...

12.List the two steps of the expense recognition principle.1.Identify all the expenses incurred during the accounting period.2.Measure the expenses and recognize them in the same period in which any relatedrevenues are earned.13.What is another name for the expense recognition principle?A.ExpenseruleB.Matching principleC.Time-period conceptD.Revenue principlePart III: Adjust the accounts14.What are the three categories of accounting adjusting entries?1.Deferrals2.Depreciation3.Accruals15.What is the definition of a deferral?A deferral is an adjustment for payment of an item or receipt of cash in advance.16.What is the definition of depreciation?Depreciation allocates the cost of a plant asset to expense over the asset’s useful life.17.What is the definition of an accrual?An accrual is the opposite of a deferral. It is an expense or a revenue that occurs beforethe business pays or receives cash.

Loading page image...

18.(a) What accounts would be debited and credited to record theprepayment of three months’rent? (b) What accounts would be debited and credited to make the adjustment after theprepaid rent has been used up?a.Prepaid rent isdebited,and Cash is creditedb.Rent expense is debited and Prepaid rent is credited19.Whatwould the journal entry to record $500 worth of depreciation be?Depreciation Expense500Accumulated Depreciation50020.What type of account is Accumulateddepreciation? What is its normal balance?Accumulated depreciation is a contraasset account with a normal credit balance.21.What two distinguishing characteristics do contra accounts have?1.Contra accountsalways haveacompanion account.2.Theirnormal balanceisopposite that of theircompanion account.22.How is the book value of a plant assetcalculated?Costminusaccumulated depreciation23.Which of the following would be an accrual adjustment?A.Salary expenseB.Unearned revenueC.Service RevenueD.All of the above24.What is a revenue that has been earned but not yet collected called?Accruedrevenue25.All accrued revenues are accounted for similarly–debit a ___Receivable____________ andcredit a ____Revenue___________.

Loading page image...

26.What type of account is unearned revenue?A.RevenueB.AssetC.LiabilityD.Equity27.When would a company record unearnedrevenue?A company would record unearned revenue when it collects cash from a customer priorto earning the revenue–before it delivers the goods and/or service.28.Two purposes of the adjusting process are toA._____Measure income_________________________, andB._____Update the balance sheet_________________________Therefore, every adjusting entry affects both of the following:C._____Revenue or expense (to measure income)_____________D._____Asset or liability (to update the balance sheet)__________29.What istypically a company’s final adjustingentry of the period?The accrual of income tax expense30.What is the document that lists all the accounts and their final adjusted balances in a singleplace called?The adjusted trial balance

Loading page image...

Part IV: Construct the financial statements31.What order must the financial statements be prepared in? Explain why the statements must beprepared in this order.The income statement→The statement of retained earnings→Balance sheet→Statement of cash flows. The statements must be prepared in this order because netincome is calculated on the income statement. Net income then flows through to thestatement of retained earnings and is used to calculate ending retained earnings. Endingretained earnings is carried forward to the balance sheettocalculate total liabilities andstockholders’ equity.Part V: Close the books32.What three types of accounts require closing entries?1.Revenue2.Expense3.Dividend33.Are temporary or permanentaccounts closed each period?Temporary34.List the three types of permanent accounts.1.Assets2.Liabilities3.Stockholders’ equity35.Put thefollowingsteps to close a company’s booksin the correct order.A.Credit the Dividends accountforits debit balance. Debit Retained Earnings.B.Debit each revenue accountforits credit balance. Credit Retained Earnings for the sumof the revenues.C.Credit each expense accountforits debit balance. Debit Retained Earnings for the sumof the expenses.BCA

Loading page image...

36.Dividends is an expense account. True or False?False37.What is the most liquid asset?Cash38.Are current or long-term assets more liquid?Current39.List five examples of current assets.(Student answers can vary.)1.Cash2.Short-term investments3.Accounts receivable4.Merchandise inventory5.Prepaid expenses40.List fiveexamples of long-term assets.(Student answers can vary.)1.Property, Plant, and Equipment2.Land3.Buildings4.Furniture andFixtures5.Equipment41.What is the definition of current liabilities?Current liabilities are debts that must be paid within one year after the balance sheetdate or within thebusiness’soperating cycle if longer than one year.42.What is an example of a long-term liability?(Student answers canvary.)Note payable (portion not due within one year)

Loading page image...

43.What are the two basic formats of the balance sheet?1.Report format2.Account format44.What are the two basic formats of the income statement?1.Single-step income statement2.Multi-step income statementPart VI: Analyze and evaluation a company’s debt-paying ability45.Which of the following is the equation for calculatingnet working capital?A.Total current assets–Total current liabilitiesB.Net income–LiabilitiesC.Total current assets / Totalcurrent liabilitiesD.Net income / Liabilities46.What is the formula to calculate the current ratio? What does the current ratio measure?Total current assets / Total current liabilities. The current ratio measures the company’sability to pay currentliabilities with current assets.47.What is typically considered a strong current ratio?1.5048.What is the formula to calculate the debt ratio?Total liabilities / Total assets49.What does the debt ratio measure?The debt ratio indicates the proportion of a company’s assets that is financed with debt.It measuresa business’s ability to payboth current and long-term debts.

Loading page image...

Chapter 4-Internal Control & CashDirected Reading WorksheetAnswer KeyPart I: Describe fraud and its impact1.What is the definition of fraud?Fraud is the intentional misrepresentation of facts, designed to persuade another partyto act in a waythat causes injury or damage to that party.2.The longer a perpetrator has worked for an organization, the higher the fraud losses tend to be.True or false?True3.What are the two most common types of fraud that impact the financial statements?1.Misappropriation of assets2.Fraudulent financial reporting4.What are the three elements that make up virtually everyfraud?1.Motive2.Opportunity3.Rationalization5.Fraud is the ultimate ________unethical_________ ___act__________ in business.Part II: Explain theobjectives and components of internal control6.Define internal control.Internal control is a plan of organization and a system of procedures implemented bycompany management and the board of directors to prevent, detect and/or correctfraud.

Loading page image...

7.Listthe five objectives of internal control.1.Safeguard assets.2.Encourage employees to follow company policies.3.Promote operational efficiency.4.Ensure accurate, reliable accounting records.5.Comply with legal requirements.8.The U.S. Congress requirespublic companies to maintain a system of internal controls andrequires their auditors to examine those controls. True or False?True9.List the five components of internal control.1.Control environment2.Risk assessment3.Information system4.Control procedures5.Monitoring of controls10.Which component of internal control is described as the “tone at the top” of the business?Control environment11.Which component of internal control provides “eyes and ears” so that no one person or groupcan process a transaction without being checked by another person or group?Monitoring of controls12.What three key duties need to be separated for proper segregation of duties?1.Asset handling2.Record keeping3.Transaction approval

Loading page image...

13.Describe the difference between internal andexternal auditors.Internal auditors are employees of the business. They ensure that employees arefollowing company policies and determine whether the company is following legalrequirements. External auditors are usually CPAs who are completely independent ofthe business. They are hired to determine whether the company’s financial statementsare prepared in accordance with U.S. GAAP. Auditors examine the client’s financialstatements and underlying transactions to form a professional opinion on the accuracyand reliability of the company’s financial statements.14.List theSCALPprinciples.1.Smart hiring practices andSeparation of duties2.Comparisons andCompliance monitoring3.Adequate records4.Limited access to both assets and records5.Proper approvals (either general or specific) for each class of transaction15.What is afidelity bond?A fidelity bond is an insurance policy that reimburses the company for any losses due toemployee theft.16.List threerisks that are created with the use of e-commerce.1.Stolen credit card numbers2.Malware3.Phishing expeditions17.__Encryption____________ rearranges messages by mathematical processtoprotectconfidential information.18.____Firewalls_____________ limit access into a local network. Usually several are built intothesystem.

Loading page image...

Part III: Evaluate internal controls over cash receipts and cash payments19.Describe the controls in place during a typical over the counter cash purchase.The point-of-sale terminal provides control of the cash receipt, while alsorecording thesale and reducing inventory for the cost of the goods sold. For each transaction, thecustomer receives a receipt as proof of purchase. The cash drawer opens, and themachine electronically records the sale as each transaction occurs. At theend of eachshift, the cash drawer is delivered to the main office, where it is combined with the restof the cash and then delivered to a bank for deposit via an armored car. A separateemployee in accounting will then reconcile the electronic record withthe cash turned in.20.What is the final step in the process to control cash receipts received through the mail?The controller compares the bank deposit amount from the treasurer and the debit toCash from the accounting department to ensure they balance.21.Companies make most payments with cash. True or false?False22.Tohelp prevent fraud, companies split what four duties among different employees wheneverpossible?1.Purchasing goods2.Receiving goods3.Preparing check or EFT for payment4.Approval of the payment23.What documents are included in a company’s payment packet?a.Receiving report, invoice, and purchase orderb.Invoice, check, and receiving reportc.Purchase order, remittance advice, and deposit checkd.Remittance advice, invoice, and check

Preview Mode

This document has 87 pages. Sign in to access the full document!

Report

Study Now!

Document Details

Related Documents

Accounting

Master Managerial Accounting Techniques

Controlling and Reporting of Real Assets

Sarbanes Oxley Act, GAAP and IFRS

Accounting Audit Final Exam MCQs 2015

Team A Week 5 Problems

IFRS or US GAAP Which is the Best Reporting Standard

Understanding Key Concepts in Managerial Accounting

Financial Reporting, Regulations, and Corporate Governance

Midterm Exam on Governmental and Not-for-Profit Accounting

Company

Explore

Study Tools