FINANCIAL- ACCOUNTING ACTUA UESTIONS

FINANCIAL- ACCOUNTING ACTUA UESTIONS

AND ANSWERS WITH CORRECT VERIFIED SOLUTIONS.

⫸ benefits of EFT. Answer: -speed up collections

-company receives EFT's immediately -because these payments are deposited directly into the company's bank account, EFT's eliminate the need for some internal controls

⫸ cash payments. Answer: cash payments:

• writing a check or completing an EFT to a supplier
• paying employees via EFT

⫸ goal for internal control of cash payments. Answer: to ensure that the business pays only for properly authorized transactions.

⫸ voucher system. Answer: a process for approving and documenting all purchases and payments on account.

-voucher: a collection of documents prepared at each step in the system.

-at each step, employee responsibilities are limited to specific tasks that occur only after obtaining and documenting proper authorization in the prior step.

⫸ cash paid to employees via EFT. Answer: directly deposit paycheck to employees using EFT -company initiates EFT when it instructs the bank to transfer the net pay due to each employee directly from the company's bank account to each employee's checking account.-positive because it eliminates the task of writing and distributing checks and employee has access to check without having to make a deposit -negative is that bank might accidentally over/underpay an employee by transferring wrong amt of money out of company's bank account.

⫸ imprest system. Answer: a process that controls the amount paid to others by limiting the total amount of money available to be transferred. 1 / 2

-company instructs bank to transfer the total net pay of all employees for the pay period out the the company's general bank account and into a special payroll account established for that purpose.-the bank then transfers the individual amounts from the payroll account to the employees checking accounts.

⫸ how banks help businesses control cash. Answer: 1. restricting access- banks provide a secure place to deposit cash so businesses need to keep only a limited amount of cash on hand which reduces the risk that it will be stolen or misplaced.

• documenting procedures- by processing payments made by check or EFT, banks facilitate and

document business transactions.

• independently verifying- company accountants use a statement of account prepared by the

bank to double-check the accuracy of cash records. compare these two sets of records and investigate any differences to verify that a company's records are accurate.

⫸ bank reconciliation. Answer: an internal report prepared to verify the accuracy of both the bank statement and the cash accounts of a business or individual.-key internal control because it provides independent verification of all cash transactions that the bank has processed for the company.-procedure done monthly by a company employee whose duties are segregated from recording and handling cash.

⫸ bank statement. Answer: for every bank account that a business opens, the bank generates a statement that it makes available online.

• overall summary of activity in the account (dates)
• a list of specific transactions posted to the account (checks cleared, deposits made, other

transactions)

• running balance in the account (daily balance)

⫸ checks cleared on bank statement. Answer: 1. after the check is written the payee deposits the check to a financial institution

• that financial institution contacts the check writers bank, which intern withdraws the amount

of the check from the check writers account and reports it as a deduction on the bank statement

• the check is then said to have cleared the bank

-checks listed on bank statement in the order they clear

⫸ deposits made on bank statement. Answer: -deposits are listed on the bank statement in the order in which the bank processes them

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