 In this presentation, we will take a look at some multiple choice questions related to cash and internal controls. First question, document that the Purchasing Department prepares and sends to the vendor to place an order is called the A. Purchase Requisition B. Invoice A to let you submit an invoice C. Receiving Report Report D. Purchasing Document Or E. Purchase Order Order! Let's go through this one more time. There should be a D here, by the way. That we are missing. I'll just put that there. That's a D. So here we go. Document that the Purchasing Department prepares and sends to the vendor to place an order is called the A. Purchasing Request Sounds kind of reasonable. I'm going to keep it for now. B is an invoice. We're not going to send the invoice because that's what we send to our customers in order to... It's basically a bill to our customers for services we did. Not what we're purchasing, so that's not it. C is a receiving report. It might sound reasonable, but really that's going to be the report that we get when we get this stuff. So that's actually not it. That's not the request. D says Purchasing Document. That sounds kind of reasonable. I'll keep that for now. And E says Purchase Order. So we're going to read through this one more time. We're going to say the document that the Purchasing Department prepares and sends to the vendor to place an order is called the Purchase Requisition or Purchasing Document or Purchase Order. Now of those three, you kind of just got to know the terminology here, and that's going to be a Purchase Order. So it's going to actually be the Purchase Order. And that's going to be something... The Purchase Order is a little bit different than we might say if we purchase something from Amazon or something like that where we pay before we get the stuff sent to us. If we're a merchandising company and we may often be able to send a purchase order requesting that we get the stuff sent to us, the inventory, before we make the payment. So there's actually no transaction related to the purchase order. Typically something that the Purchasing Department will be in charge of to issue the purchase order. Next question. During the month, company issued a check, but the check did not clear the bank during the month. When preparing bank reconciliation, the company should... A. Deduct the check amount from the book balance of cash. B. Add the check amount to the book balance of cash. C. Tell the bank they made an error. D. Add the check amount to the bank balance, or E. Make a journal entry in the company records for an error. Okay, so let's read through this one more time. During the month, company issued a check, but the check did not clear the bank during the month when preparing the bank reconciliation the bank should. So if we break this down, we're pretty much thinking, okay, this sounds like a bank reconciliation type problem, because during the month, the company issued a check. We wrote a check, but the check did not clear the bank. So we're talking about an unclear check, an outstanding check. And that's typically going to be something that we're going to have to record on the bank reconciliation in order to reconcile the bank balance to the book balance. So if we go through this, we're going to say, okay, A. Deduct the check amount from the book balance of cash. Now, we're going to have to do something. This sounds like a bank reconciliation transaction, but we're not going to do something to the book balance. Our book balance is right. We wrote the check. We decreased our check and account by what we wrote. It's just that it didn't get recorded by the bank yet because they don't have it yet. So it's not going to be A. B says, add the check amount to the book balance of cash. Again, our books are right. So our books are okay. So it's not B. C says, tell the bank they made an error. And the bank didn't really make an error. They just don't know yet. It's just a timing difference. Once they know, then they're going to record the check on their side. It'll happen the next month. So it's not really C. D says, add the check amount to the bank balance. And that seems like what we're going to do when we think about our bank reconciliation, the bank balance is going to have to go up. So I think that's going to be it, but let's read E. Make journal entry in the company records for an error. And again, we didn't make an error, really. Our books are right. The check actually went out and that's good. It's the bank that's not quite right, but it's only not right, not because of an error, but because they don't know yet. It's a timing difference. So the correct answer is D. Full question. During the month, company issued a check, but the check did not clear the bank during the month. When preparing a bank reconciliation company should D, add the check amount to the bank balance, basically the bank balance side of the bank reconciliation in order to reconcile bank reconciliation. Next question. Report identifying differences between the cash balance in a company's records and the bank balance reported in the bank is A. Internal audit B. Bank reconciliation C. Bank statement D. Error statement or E. Trial balance. So we'll read through it one more time and see if we can cross some options off with the process of elimination. Report identifying differences between the cash balance in the company's records and the balance reported in the bank is A. Internal controls. So it's not going to be A. It is kind of an internal control, but it's not as specific as it could be. B. Bank reconciliation and that's pretty much it. That's what we're doing here. C. Bank statement We might get those two confused, like the bank statement and the bank reconciliation, but the bank statement is what we get from the bank. And our reconciliation will be reconciling the two. D. Error statements. That's not it. I'm not sure that's really a thing about here in our chapter here. E. Trial balance. That's not it. So it's going to be B. Let's read through it one more time. Report identifying differences between the cash balance in the company's records and the balance reported in the bank is the bank reconciliation. That's what the bank reconciliation does. It reports the difference between what we have on our books and what is on the bank statement. Next question. Bank reconciliation and amount of an unrecorded bank service charge should be A. Added to the book balance of cash. B. Added to the bank balance of cash. C. Deducted from the bank balance of cash. D. Deducted from the book balance. E. Noted in the notes to the bank statement. So one more time, we'll read through this to see if we can cross anything off of this elimination. On a bank reconciliation and amount of an unrecorded bank service charge should be. So an unrecorded bank service charge would be something that is on the bank statement that we don't have on our books because we didn't know about it because it's on the bank statement and the bank just took money out of our account and told us about it basically when we get the bank statement. So A. says it should be added to the bank balance of cash. It's going to have to adjust the book balance it's something that we didn't have in place but we're not going to add it we're going to have to subtract it because it's a service charge so our books are wrong they're too high by the fact that we didn't record the service charge yet because we didn't know about it until we got the bank statement. B. says added to the bank balance of cash added to the bank balance it's not going to change the bank balance the bank's going to say they're right you know they already deducted this added back there unless we can convince them not to charge it for the service charge which is unlikely and then C. says deducted from the bank balance of cash again it's not going to be on the bank balance that we're going to adjust because the bank balance is right D. says deducted from the book balance and that looks like it's going to be the one there's a service charge that we didn't know about and so we're going to have to fix our book balance and subtract it from our book balance E. says noted in the notes to the bank statement and we might do that but we're also going to have to actually make an adjustment it's not just a note it's all we need so D. looks like the correct answer one more time question and answer is on a bank reconciliation an amount of an unrecorded bank service charge should be D. deducted from the book balance