1. Riverton Company rents a building that it uses in its operations. The accountant for Riverton Company mistakenly input a $1,000 rental payment on the building as just $100 in the accounting records. What is the impact of this recording error on the financial statements?
0. Expenses are too high, so reported net income is too low.
0. Expenses are too low, so reported net income is too high.
0. Revenues are too low, so reported net income is too low.
0. Revenues are too high, so reported net income is too high.
1. The accountant for Kearns Company mistakenly posted an expense amount as an asset in the general ledger. What is the financial statement impact of this error?
1. Assets are too low, and retained earnings are too high.
1. Assets are too high, and retained earnings are too high.
1. Assets are too high, and retained earnings are too low.
1. Assets are too low, and retained earnings are too low.
1. Why is the separation-of-duties control so important with cash?
2. Without separation of duties, the general ledger is maintained by the same person who posts the adjusting entries.
2. Without separation of duties, the adjusting entry process and the closing entry process are done by the same person.
2. Without separation of duties, an employee who takes cash can cover up the shortage by adjusting the accounting records.
2. Without separation of duties, the general ledger is maintained by the same person who posts the closing entries.
1. Roger Lemmon is the chief financial officer (CFO) for a large aviation parts supply company. In recent months, Roger has been alarmed at the increase in inventory losses. He is not sure whether parts orders are not being properly recorded or whether employees or outside individuals are stealing parts. Roger realizes that he needs to improve the control activities related to inventory. He wants to start with the detective controls. What are the two detective controls?
3. Proper authorizations and physical control
3. Adequate documents and independent checks
3. Segregation of duties and physical control
3. Independent checks and segregation of duties
1. Maya Company has seen slow but steady growth over the past 10 years. Maya Company started small, and all of the employees were family members. However, the business is now big enough that it is important to start setting up a more sophisticated internal control structure, including segregation of duties. What are the three specific functions that must be kept separate?
4. Physical possession, adjusting, posting
4. Recording, physical possession, posting
4. Approving, evaluating, ordering
4. Approving, recording, physical possession
1. In preparing a bank reconciliation,
what is the proper treatment of a deposit in transit
5. Subtract from the reported cash balance in the bank statement
5. Subtract from the reported cash balance in the company’s books
5. Add to the reported
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