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Bookkeeping for Small Business fully solved
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Bookkeeping for Small Business fully solved
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Bookkeeping for Small Business1. Each accounting transactions begins with some type of source document, which differs depending on
the type of transaction. Which source document is not a purchases source document?
Incorrect
A) Vendor invoices
B) Purchase orders
C) Packing slips
D) Sales orders
E) Receiving reports - correct answer ✔✔D) Sales orders
2. Which internal control involves allocating bookkeeping tasks among personnel so that one individual
does not have the ability to make an accounting error (either intentionally or unintentionally) and also
cover it up? This principle implies that the person with physical access to cash or other moveable assets
(investments or inventory) should not also be involved with the related record keeping.
Incorrect
A) Segregation of duties
B) Restricted access
C) Document controls
D) Processing controls
E) Reconciliation controls - correct answer ✔✔A) Segregation of duties
3. Which cash receipts system keeps details of only the current period's activity and groups all other
open items into a single beginning balance amount?
Incorrect
A) Open item system
B) Balance Forward system
C) Order-entry system
D) Point of sale system - correct answer ✔✔B) Balance Forward system
,4. Which of the following is not a recommendation for controlling and safeguarding receipts when
processing mail receipts?
Incorrect
A) The company should assign someone with no other cash receipt or processing
B) The secretary or receptionist opening the mail should separate customer
C) The secretary or receptionist should forward the actual checks to accounting
D) The secretary or receptionist should prepare the original deposit slip along with a - correct answer
✔✔C) The secretary or receptionist should forward the actual checks to accounting
5. The bank statement reconciliation process is a very effective after-the-fact internal control tool.
Moreover, the process is crucial to many small businesses since their accounting systems are often cash-
driven. Which of the following statements regarding the bank statement reconciliation process is false?
Incorrect
A) The bank statement reconciliation helps detect errors (both the company's and
B) The bank statement reconciliation reveals bank debits and credits that have not
C) The bank statement reconciliation should be performed by someone with other
D) The bank statements should be received by the person responsible for receiving - correct answer
✔✔C) The bank statement reconciliation should be performed by someone with other
6. Reconciling the accounts receivable subsidiary ledger (or aged trial balance) to the accounts receivable
account in the general ledger is crucial to most small businesses. If differences between the aged trial
balance and subsidiary ledger are not resolved, either the company's financial statements or billing
statements mailed to customers (or both) are misstated. If differences go back beyond the current
month, locating and resolving the individual differences becomes increasingly difficult and time-
consuming. Which of the following statements is false?
Incorrect
A) Small businesses can gain some assurance that cash receipts journals and sales journals were posted
to the general ledger by recalculating the accounts receivable general ledger balance.
B) Accounting persons recalculate the ending general ledger balance by starting with the beginning
general ledger balance, subtracting totals per the sales journals, - correct answer ✔✔B) Accounting
persons recalculate the ending general ledger balance by starting with the beginning general ledger
balance, subtracting totals per the sales journals, adding totals per the cash receipts journals, and
adjusting for any other transactions posted to the general ledger.
, 7. Which of the following is not a processing and recording purchases activity?
Incorrect
A) Processing invoices
B) Recording invoices in the accounting system
C) Disbursing cash
D) Bank reconciliation - correct answer ✔✔D) Bank reconciliation
8. After the accounting staff has completed the initial invoice processing (received the invoice, obtained
approval for its payment, and updated the vendor information), the staff performs clerical processes to
record the purchases in the accounting records. Which of the following statements is false?
Incorrect
A) Traditionally, the bookkeeper performed calculations to determine the clerical accuracy of the invoice.
With the advent of computer prepared invoices, recalculating invoices is no longer necessary.
B) The accounting staff must assign accounting codes to each invoice to record the transaction in the
form a computer will understand. Because detecting and correcting a miscoded transaction is often
difficult and time-consuming, the staff should take extra care to ensure the initial transaction coding is
correct.
C) When coding invoices, accounting staff may encounter transactions that require the establishment -
correct answer ✔✔A) Traditionally, the bookkeeper performed calculations to determine the clerical
accuracy of the invoice. With the advent of computer prepared invoices, recalculating invoices is no
longer necessary.
9. After recording vendor invoices in the accounting system, the bookkeeper is ready to pay the invoices.
The bookkeeper has two major activities when disbursing cash: 1. selecting the invoices to pay, and 2.
issuing checks. During these activities, the bookkeeper's concerns include taking full advantage of the
vendor's credit terms and protecting the business's cash from misuse. Which of the following statements
regarding these two activities is false?
Incorrect
A) Many businesses take advantage of the vendor's credit terms by delaying the payment of invoices
until near the end of the credit term. This practice requires that each invoice be assigned a payment
date.
B) Credit terms is the key factor in deciding when to pay an invoice, thus other important factors
including the business's cash on hand, expected cash flow, relations with the vendor, and credit rating
considerations are not considered.
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