Multiple Choice questions
1. Deposits made by a company but not yet reflected in a bank statement are called
a. Credit memoranda
b. Debit memoranda
c. Deposits in transit
d. None of the above
2. Which one of the following would not appear on a bank statement for a checking account?
a. Interest earned
b. Deposits
c. Service charges
d. Outstanding checks
3. Which one of the following is not a cash equivalent?
a. 30-day certificate of deposit
b. 60-day corporate commercial paper
c. 90-day U.S. Treasury bill
d. 180-day note issued by a local or state government
4. Business activity is best described as:
a. Noncyclical
b. Cyclical
c. Lacking deviation
d. Predictable
5. The five primary activities of a business generally consist of:
a. Making a profit, issuing financial statements, repaying debts, issuing dividends to shareholders, and complying with laws and regulations
b. Receiving assets, selling assets, issuing financial statements, collecting cash, and making cash disbursements
c. Receiving cash, disbursing cash, buying assets, issuing dividends, and paying off liabilities
d. Receiving assets, purchasing assets, selling goods or services, collecting cash from customers, and repaying owners and creditors
6. Effective cash management and control includes all of the following except:
a. Purchase of stocks and bonds
b. Bank reconciliations
c. The use of a petty cash fund
d. Short-term investments of excess cash
7. Cash management principles do not include:
a. Speeding up collection from customers
b. Earning the greatest return possible on excess cash
c. Paying suppliers promptly
d. Delaying payment of suppliers
8. Which one of the following statements is true?
a. Sound internal control practice dictates that cash disbursements should be made by check, unless the disbursement is very small.
b. The person handling the cash should also prepare the bank reconciliation.
c. Good cash management practices dictate that a company should maintain as large a balance as possible in its cash account.
d. Petty cash can be substituted for a checking account to expedite the payment of all disbursements.