Accounting 201 Exam 2 Questions
and Answers All Correct
What is Reasonable Assurance? - Answer-The costs of establishing control procedures
should not exceed their expected benefit
Why is the human element an important factor in every system of internal control? -
Answer-Because a good system can be ineffective as a result of employee fatigue,
carelessness, or indifference
What is a Collusion? - Answer-When 2+ employees work together to get around
prescribed controls
What asset is most susceptible to fraudulent activity? - Answer-Cash
Internal control over cash disbursements is more effective when companies pay by..... -
Answer-Check or electronic funds transfer (EFT) rather than cash
What is a Voucher System? - Answer-A network of approvals by authorized individuals,
acting independently to ensure that all disbursements by check are proper
What is a Voucher? - Answer-An authorization form prepared for each expenditure in a
voucher system
How many journal entries does a Voucher System involve? - Answer-2- one to record
the liability when the voucher is issued, and another to pay the liability that relates to the
voucher
What is a Petty Cash Fund? - Answer-A cash fund used to pay relatively small amounts
What is a Bank Reconciliation? - Answer-the process of comparing the bank's balance
with the company's balance, and explaining the differences to make them agree
What is an NFS check - Answer-A Non Sufficient Funds check is a check not paid by a
bank because of insufficient funds
What does "Reconciling the Bank Account" mean? - Answer-Making the balance per
books and balance per bank agree with the correct or true amount
, What are the 2 causes for a need of reconciliation? - Answer-Time Lags
Errors
What are some examples of time lags? - Answer--Deposits in transit
-Outstanding checks
-Bank Memorandum
-Errors
Who should prepare the reconciliation? - Answer-An employee who has no other
responsibilities related to cash
What are deposits in transit? - Answer-Deposits recorded by the depositor that have not
been recorded by the bank
Perpetual Inventory System - Answer-Contains detailed records of each purchase and
sale, COGS is determined each time a sale occurs
Periodic Inventory System - Answer-No detailed inventory records, COGS is determined
at the end of the accounting period (periodically) by means of physical inventory
To determine the COGS under a Periodic System, these 3 steps are necessary -
Answer-1) Determine the COGS on hand at the beginning of the accounting period
2) Add (+) it to the Cost of Goods Purchased
3) Subtract (-) the Cost of Goods on hand at the end of the accounting period
Which Inventory System is Preferable? Perpetual or Periodic? - Answer-Perpetual
because it provides better control and it continuously shows the quantity and cost of the
inventory on hand at any time, however it does cost more to maintain
When recording purchases of merchandise under the perpetual method, what do you
(usually) Dr. and Cr.? - Answer-Dr. Inventory
Cr. Accounts payable
What are Freight Costs? - Answer-refers to FOB (free on board) point determines who
pays
FOB Shipping Point - Answer-incurred by the BUYER, buyer pays the freight cost
FOB Destination - Answer-Incurred by the SELLER, seller pays the freight cost
When do companies record sales revenue? - Answer-When the performance obligation
is satisfies (when goods are transferred from the seller to the buyer)
and Answers All Correct
What is Reasonable Assurance? - Answer-The costs of establishing control procedures
should not exceed their expected benefit
Why is the human element an important factor in every system of internal control? -
Answer-Because a good system can be ineffective as a result of employee fatigue,
carelessness, or indifference
What is a Collusion? - Answer-When 2+ employees work together to get around
prescribed controls
What asset is most susceptible to fraudulent activity? - Answer-Cash
Internal control over cash disbursements is more effective when companies pay by..... -
Answer-Check or electronic funds transfer (EFT) rather than cash
What is a Voucher System? - Answer-A network of approvals by authorized individuals,
acting independently to ensure that all disbursements by check are proper
What is a Voucher? - Answer-An authorization form prepared for each expenditure in a
voucher system
How many journal entries does a Voucher System involve? - Answer-2- one to record
the liability when the voucher is issued, and another to pay the liability that relates to the
voucher
What is a Petty Cash Fund? - Answer-A cash fund used to pay relatively small amounts
What is a Bank Reconciliation? - Answer-the process of comparing the bank's balance
with the company's balance, and explaining the differences to make them agree
What is an NFS check - Answer-A Non Sufficient Funds check is a check not paid by a
bank because of insufficient funds
What does "Reconciling the Bank Account" mean? - Answer-Making the balance per
books and balance per bank agree with the correct or true amount
, What are the 2 causes for a need of reconciliation? - Answer-Time Lags
Errors
What are some examples of time lags? - Answer--Deposits in transit
-Outstanding checks
-Bank Memorandum
-Errors
Who should prepare the reconciliation? - Answer-An employee who has no other
responsibilities related to cash
What are deposits in transit? - Answer-Deposits recorded by the depositor that have not
been recorded by the bank
Perpetual Inventory System - Answer-Contains detailed records of each purchase and
sale, COGS is determined each time a sale occurs
Periodic Inventory System - Answer-No detailed inventory records, COGS is determined
at the end of the accounting period (periodically) by means of physical inventory
To determine the COGS under a Periodic System, these 3 steps are necessary -
Answer-1) Determine the COGS on hand at the beginning of the accounting period
2) Add (+) it to the Cost of Goods Purchased
3) Subtract (-) the Cost of Goods on hand at the end of the accounting period
Which Inventory System is Preferable? Perpetual or Periodic? - Answer-Perpetual
because it provides better control and it continuously shows the quantity and cost of the
inventory on hand at any time, however it does cost more to maintain
When recording purchases of merchandise under the perpetual method, what do you
(usually) Dr. and Cr.? - Answer-Dr. Inventory
Cr. Accounts payable
What are Freight Costs? - Answer-refers to FOB (free on board) point determines who
pays
FOB Shipping Point - Answer-incurred by the BUYER, buyer pays the freight cost
FOB Destination - Answer-Incurred by the SELLER, seller pays the freight cost
When do companies record sales revenue? - Answer-When the performance obligation
is satisfies (when goods are transferred from the seller to the buyer)
