 In this presentation we will take a look at multiple choice questions related to cash and internal controls. First question. Outstanding checks are a. Written and paid by the bank. The bank. B. Received but not recorded in the company books. Books. C. Held as blank checks. Checks! D. Written but not yet paid by the bank. Put in the bank. E. Issued by the bank. Once again we will read through these and cross them out and looking to cross them out with the process of elimination. Outstanding checks are a. Written and paid by the bank. So if they were both written and paid they wouldn't be outstanding they would be cleared. So that's not going to be it. B. Received but not recorded in the company books. So that seems backwards because if would be recorded in the books but not yet cleared the bank would be the way we're typically thinking because we would be writing it before it clears the banks. So C. Held as blank checks. I don't think it's not going to be a blank check for outstanding check. D. Written but not yet paid by the bank. That sounds pretty reasonable. And E. says issued by the bank. That would be some type of bank check. So that's typically not it. D. Looks like the best definition of the outstanding check and that's what it is. It says written but not paid by the bank. So we recorded it on our books. We gave the check out. It hasn't yet cleared the bank because the person receiving it hasn't what deposited it and it hasn't been our bank doesn't know about it being deposited yet. So with correct answer D. One more time outstanding checks are D. Written but not yet paid by the bank. Next question. Journal entry to set up a petty cash fund includes A. Debit to cash and credit to petty cash. B. Debit to cash and credit to cash over and short. C. Debit to petty cash and credit to cash. D. Debit to petty cash and credit to accounts receivable and E. Debit to cash and credit to petty cash over and short. So this is one of those ones we want to probably read through this and try to write the journal entry down ourselves and then go through this otherwise we'll get turned around with the debits and credits. So we have the journal entry to set up a petty cash fund includes and if we're going to set up petty cash we're going to take the money out of the normal checking account and put it into petty cash and these are two asset type accounts asset type accounts have debit balances. So I would write the journal entry down first in journal entry format not in this kind of linear format and that would help us out typically discuss the way we're used to seeing it. So I would say that well we're going to debit petty cash petty PPC petty cash is going to be the debit and we're going to credit cash would be the credit's going to come out of cash and it's going to go into petty cash. So that's as simple as the simple as that symbols journal entry cash is a credit balance account is going to go down petty cash cash is a debit balance account. Therefore it's going to go down with a credit petty cash is a debit balance account. It's going to go up with a debit. So if we look through these it says a cash is cash our debit to cash credit to petty cash that's backwards B says debit to cash and credit to cash over in short we're not dealing with the over and short yet that's when we reimburse the cash account or the petty cash account I should say C says debit to petty cash and credit to cash that looks like the one and it's going to go ahead and circle that now D says debit to petty cash and credit to accounts receivable no accounts receivable is not involved here E says debit to cash and credit to petty cash over in short we're not dealing with over and short so C looks like the answer once again question and answer journal entry to to journal entry to set up a petty cash fund includes C debit to petty cash and credit to cash next question a bank deposit on march 28th that does not appear on the bank statement dated march 31st when preparing the bank reconciliation the company should a deduct the deposit from the bank statement balance B tell the bank they made an error C deduct the deposit from the books D add the deposit to the book balance of cash E add the deposit to the bank statement balance so we'll read through here and see if we can cross some of these out with the process of elimination a bank deposit on bank deposit on march 28th does not appear on the bank statement dated march 31st when preparing the bank reconciliation the company should a deduct the deposit from the bank statement balance so the bank was it was deposited on march 28th but it didn't it wasn't on the bank statement so we would typically say that that's a timing difference that probably happened that we put the deposit in place the computer system didn't pick it up yet in march it will do so in uh april so that it's just a timing difference here so the timing difference is what we're dealing with so the ace has deducted deposit from the bank statement balance um it's correct that we're looking at the bank statement balance but we wouldn't be deducting it we'd have to add it because if we look at the bank statement balance and this is a deposit that's not included in it and it's included in our side correctly so if we want to get to our side we would have to add it's back so it's not going to be a b says tell the bank they made an error and the bank didn't make an error they just they just don't know the information yet they will be recorded in the next month we hope we're going to check that in april see if it's been recorded and so that's just a timing difference that's not it deduct the deposit from the books now we're not going to deduct the deposit from the books because our books are correct we recorded the deposit on our side because we made the deposit the bank hasn't recorded it on their side because they don't know about it yet so it's not going to be an adjustment to the book side of things d says add the deposit to the book balance of cash again our books are correct so we're not going to we're not going to be dealing with our books side of thing and then e says add the deposit to the bank statement balance and that's that looks like it's both through the process of elimination and just looks correct it looks like it would be e so let's read it one more time and we'll read through the answer a bank deposit on march 28th that does not appear on the bank statement dated march 31st when preparing the bank reconciliation the company should e add the deposit to the bank statement balance so in other words the bank statement balance when we do our bank reconciliation will be too low compared to our balance by this deposit which we correctly put on our side but which the bank does not know because they don't have the deposit yet and therefore to reconcile we will have to increase the bank balance side