1) Which of the following is not part of the definition of internal control? a) Separation of duties b) Safeguard Assets c) Encourage employees to follow company policies d) Promote operational Efficiency 2) The Sarbanes-Oxley Act a) created the Private Company Accounting Board b) Allows accountants to audit and perform any type of consulting work for a public company c) Stipulates the violators of the act may serve 20 years in prison for securities fraud d) requires that an outside auditor mist evaluate a public company's internal controls. 3) Separation of duties is an important internal control of a) cash receipts b) cash payaments c) neither a or b d) both a and b 4) The document that explains all the differences between the company's cash records and the bank's figures is called a(n) a) bank collection b) electronic fund transfer c) bank statement d) bank reconcilitation 5) With good internal controls, the person who handles cash can also a) Account for cash payments b) account for cash receipts from constromers c) issue credits to customers for sales returns d) none of the above 6) Which of the following is a limitation of the direct write-off method of accounting for uncollectibles? a) the direct write-off method overstates assets on the balance sheet b) the direct write off method does not match expenses against revenue very well c) the direct write off method does not set up an allowance for uncollectibles d) all of the above 7) the entry to record a write off of an uncollectible account when using the direct write off method involves a a) debit to allowance for bad debts b) credit to cash c) debit to accounts receivable d) debit to bad debts expense 8) What does the matching principle state? a) Expenses are recorded when they are incurred, and are matched against revenues of the period. b) Recording the least favorable amounts c) states that a company must perform strictly proper accounting only for items that are significant to the business 9) Allowance for bad debts is a(n) a) Expense b) Contra Asset c) liability d) Equity 10) What method(s) can be used to estimate uncollectibles using the allowance method a) Percent of sales b) percent of receivables c) Aging of receivables d) All of the above

ACCT 4A Ch 7 & 8 Review

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