Why Is It a Matter of Good Internal Control to Deposit

question 3

Multiple Choice

Why is it a matter of good internal control to deposit all cash receipts daily and make all payments for goods and services by check?

• A)When no paper documents are required,there is increased convenience and lower cost
• B)These actions control the access to cash and create an independent record of all cash activities.
• C)These procedures result in a more extensive testing of a company's records.
• D)The Sarbanes-Oxley Act requires these steps be taken by each publicly traded company.
• E)These procedures allow management to determine if projected cash receipts and disbursements came in over or under budgeted amounts.

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Definitions:

Adjusting Entries

Accounting records created at the close of a fiscal period to distribute revenues and expenses to the timeframe they genuinely transpired.

Reversed

In accounting, referring to the action of negating a previous transaction or entry to correct or adjust financial records.

Accrual Basis

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Insurance Expense

The cost incurred by a business for its insurance policies, which is recorded as an expense on the income statement.