C8 POA Theory

Which of the following reasons explain why a cheque may be dishonoured?

• Cheque has expired

• Cheque is post dated

• Information on cheque is inconsistent

• Information on cheque is not complete

• Payer's bank account does not have enough money

Which of the following are examples of internal controls

• Ensure business transactions are recorded accurately

• Comply with laws and regulations

• Segregation of duties

• Custody of Cash

• Authorisation

When a cheque is dishonoured, the business records a __________ in the cash at bank account

• increase

• decrease

Which of the following is NOT a purpose of internal control

• Safeguard assets of the business

• To identify fraud

• ensure business transactions are recorded accurately

• comply with laws and regulations

State the journal entries of the business when the cheque received of $150 from customer is dishonoured

• Dr Cash at bank 150

  Cr Trade Receivables 150

• Dr Cash at bank 150

  Cr Trade payables 150

• Dr Trade payables 150

  Cr Cash at bank 150

• Dr Trade receivables 150

  Cr Cash at bank 150

Obtain proper approvals for all payments from authorised personnel. Example require two persons to approve payments. Which of the following best describes the above internal control

• Authorisation

• Bank reconciliation

• Custody of Cash

• Segregation of duties

Compare the business' records with the bank's records to identify items that caused the differences between the ending balances in the business cash at bank account and the bank statement. Which of the following best describes the above internal control

• Authorisation

• Bank reconciliation

• Custody of cash

• Segregation of duties

Secure cash and cheques in a locked storage. Which of the following best describes the above internal control

• Authorisation

• Bank reconciliation

• Custody of cash

• Segregation of duties

Separate cash handling and cash recording duties among different employees so that no single person has control over the entire cash process. Which of the following best describes the above internal control

• Authorisation

• Bank reconciliation

• Custody of cash

• Segregation of duties

State the importances of preparing bank reconciliation

• To identity errors in cash at bank and errors in bank statement

• To help discover fraud

• To safeguard assets of the business

• To ensure cash at bank balance is up to date