Question

True / False

Topic: Fraud

LO: 1

1. The three elements that are almost always present when a fraud occurs are pressure, rationalization and concealment.

Topic: Internal Control

LO: 2

2. Requiring employees to take vacations is an example of a good internal accounting control feature.

Topic: Segregation of Duties

LO: 2

3. Good internal accounting control requires that the person handling cash should also make any related journal entries so that responsibility for cash can be assigned to one person.

Topic: Bank Reconciliations

LO: 5

4. At the end of an accounting period, the “cash balance per bank statement” on that date is usually the proper cash amount to show on the balance sheet.

Topic: Outstanding Checks

LO: 5

5. Outstanding checks are checks a company has written and recorded as cash disbursements that have not yet been presented to the bank for payment.

Topic: Accounts Receivable

LO: 1

5. ​Advances to company employees should be included in the Accounts Receivable balance.

Topic: Direct Write-Off Method

LO: 6

6. ​The direct write-off method of accounting for doubtful accounts mismatches revenue and expenses and overstates assets.

Topic: Direct Write-Off Method

LO: 6

7.​The direct write-off method of accounting for doubtful accounts follows the accrual concept of accounting more closely than does the allowance method of accounting for doubtful accounts.

Topic: Allowance for Doubtful Accounts

LO: 1

8. ​The Allowance for Doubtful Accounts normally has a credit balance.

LO: 1

9. ​The allowance method of accounting for doubtful accounts recognizes the related expense, even though it is not known which customers’ accounts will be doubtful.

Topic: Allowance for Doubtful Accounts

LO: 1

10.​Under the allowance method of estimating bad debts expense, writing off a specific account reduces the firm’s net assets.

Topic: Contingent Liabilities Definition

LO: 3

11.​A contingent liability is an obligation that may develop from an existing situation depending on the occurrence of a future event.

Topic: Contingent Liabilities

LO: 3

12.​A contingent liability that will probably occur should be recorded in the accounts even though the amount cannot be reasonably estimated.

Topic: Contingent Liabilities

LO: 3

13.​Lawsuits and credit guarantees are examples of contingent liabilities.

Topic: Federal Unemployment Insurance

LO: 1

14.​Federal unemployment tax is withheld from each employee’s wages.

Topic: FICA Taxes

LO: 1

15.​In most situations, the total FICA tax levied on employers will exceed the amount of FICA tax withheld from employees.

Answer 1