QUESTION 6 4 MARKS Multiple Choice Place the correet answers

QUESTION 6 (4 MARKS) Multiple Choice (Place the correet answers in your answer booklet) Which of these does not represent proper internal control of cash receipts? Daily banking of receipts I) b. Two people opening the mail c. Paying accounts directly out of the cash register d. Balancing the cash register after each employees\' shift 2) How many of these are features of good internal control of cash payments? 1. separation of record-keeping and the authority to sign cheques 2. the use of pre-numbered cheques 3. preparing regular bank reconciliation statements 4 one person having responsibility for all aspects of a cash payment a. One b. Two c· Three d. Four 3) Which of these is not a good internal control practice? a· The b. The use of passwords for computer access c. The pre-numbering of documents d. Taking out a trial balance use of the periodic inventory system for stock control 4) Which statement relating to dishonoured cheques is true? a. They are cheques from debtors deposited into the firm\'s bank account but not paid by the drawer\'s bank due to lack of funds or for other reasons b. They can be adjusted for by making a negative entry in the sales jounal c. They must be listed in the bank reconciliation d· They appear as credits on the bank statement

Solution

1) The correct option is c) Paying accounts directly out of the cash register. The proper internal control over cash receipts includes daily banking of receipts, two people opening the mail and balancing the cash register after each employees shift because all this lead to proper cash management and help in maintaining minimum cash losses and preventing fraud related to cash. But Paying accounts directly out of the cash register does not represent proper internal control of cash receipts.

2) The correct option is c) Three. All the points mentioned including 1,2, and 3 are features of good internal control of cash payment except the point 4 (i.e. one person having responsibility for all aspects of a cash payment). Because if any one person will be responsible for all aspect of a cash payment, he will have a proper control over that cash payment and he can even misappropriate the cash for his personal use.

3) The correct option is a) The use of periodic inventory system for stock control because the perpetual inventory system should be used for stock control for a good internal control practice instead of periodic internal control system as the perpetual system has a greater number of built-in controls.

4) The correct option is a) Because the dishonoured cheques are cheques from debtors deposited into the firm\'s bank account but not paid by the drawer\'s bank due to lack of funds or for other reasons and hence dishonoured (or not honoured)