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Exam 11: Other Benefits and Reimbursements

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Question 1

Multiple Choice

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Which of the following statements is true regarding errors in accounting?

A) They are intentional.
B) They are designed to achieve a particular effect in the financial statements.
C) They tend to be random, and different errors in computing income often partially offset each other.
D) They are usually carefully concealed.

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Question 2

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The accounts receivable account normally has a debit balance.

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Question 3

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The salaries payable account normally has a credit balance.

Expense accounts normally have credit balances.

A retail store has a policy that cash must be deposited in the bank twice each day. This would most likely be an example of which type of internal control?

The fact that a company has written checks that have not yet been processed by its bank means that the bank's records will show a lower account balance than the company's books will show.

A company improperly records a check for property tax as a printing expense. This misstatement can be said to arise during the

For information to meet the FASB's criterion of "representational faithfulness," it should be free from material misstatements.

The term for the feature of an accounting information system that allows a person to verify that the reports are correct, and based on properly processed information, is "management override."

Reviewing the trial balance for errors is an example of a detection control.

A company pays the right amount of rent for November, but mistakenly records this payment of November rent twice. This misstatement can be said to occur during the

"Management override" occurs when management instructs employees to ignore the normal accounting processes, and to change the numbers in a particular direction.

The accounting record that is used to initially record transactions is called a "general ledger."

A company has a computer system that will not let an accountant make a journal entry if the debits do not equal the credits. This is an example of a process design feature to prevent errors.

It is a good internal control practice to make most expenditures using cash, rather than checks.

The land account normally has a credit balance.

An "outstanding check" is a check that the company has written and mailed, but that its bank has not yet received, so the bank has not yet reduced the company's account for that check.

Even though major companies have internal control systems, errors and irregularities still sometimes occur. List and briefly discuss two general limitations of internal control systems that help explain how these problems can still occur.

When an accountant improperly copies information from a journal into a ledger, this error is said to occur during the

A well-designed system of internal controls can make material fraud less likely.