Accounting Final Exam Part 1 – Flashcards

8.) Which one of the following is not an objective of a system of internal controls? a. Safeguard company assets b. Overstate liabilities in order to be conservative c. Enhance the accuracy and reliability of accounting records d. Reduce the risks of errors

9.) Each of the following is a feature of internal control except a. an extensive marketing plan. b. bonding of employees. c. separation of duties. d. recording of all transactions.

10.) Which of the following is not a limitation of internal control? a. Cost of establishing control procedures should not exceed their benefit b. The human element c. Collusion d. The size of the company

11.) Companies that fail to maintain an adequate system of internal control a. may be subject to charges of fraud. b. will be automatically dissolved. c. may be subject to fines and officer imprisonment. d. may be forced to sell their assets.

12.) The custodian of a company asset should a. have access to the accounting records for that asset. b. be someone outside the company. c. not have access to the accounting records for that asset. d. be an accountant.

13.) From an internal control standpoint, the asset most susceptible to improper diversion and use is a. prepaid insurance. b. cash. c. buildings. d. land.

14.) A very small company would have the most difficulty in implementing which of the following internal control activities? a. Separation of duties b. Limited access to assets c. Periodic independent verification d. Sound personnel procedures

15.) In a small business, the lack of certain separations of duties can best be overcome by a. bonding the employees. b. getting the owner actively involved. c. hiring only honest employees. d. holding one person responsible for a given set of transactions.

16.) Mrs. Smith has worked for Arcco Inc. for 20 years without taking a vacation. An internal control feature that would address this situation would be a. other controls. b. establishment of responsibility. c. physical controls. d. documentation procedures.

17.) A bank statement a. lets a depositor know the financial position of the bank as of a certain date. b. is a credit reference letter written by the depositor's bank. c. is a bill from the bank for services rendered. d. shows the activities that increased or decreased the depositor's account balance.

18.) Which one of the following would not cause a bank to debit a depositor's account? a. Bank service charge b. Collection of a note receivable c. Wiring of funds to other locations d. Checks marked NSF

19.) A deposit made by a company will appear on the bank statement as a a. debit. b. credit. c. debit memorandum. d. credit memorandum.

20.) Which of the following would be deducted from the balance per books on a bank reconciliation? a. Outstanding checks b. Deposits in transit c. Notes collected by the bank d. Service charges