ACC Exam 2 Questions with 100% Correct Answers 2024/2025
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Course
ACC
Institution
ACC
ACC Exam 2 Questions with 100% Correct Answers 2024/2025
List 4 goals for the successful business use of internal controls. - ANSWERSProtect assets
Ensure reliable accounting
Promote efficient operations
Uphold company policies
Identify 7 internal control principles that are implemented ...
ACC Exam 2 Questions with 100%
Correct Answers 2024/2025
List 4 goals for the successful business use of internal controls. - ANSWERSProtect assets
Ensure reliable accounting
Promote efficient operations
Uphold company policies
Identify 7 internal control principles that are implemented by businesses in various ways.Explain what
the term "liquidity" means when it is used to describe an asset. - ANSWERSEstablish responsibilities -
tasks should be clearly established and assigned to one person (so if there is a problem we know who did
it)
Maintain adequate records - detailed records facilitate asset protection & monitoring; preprinted and
pre-numbered forms, and computerized point of sales systems (POS) facilitate efficiency, accuracy, &
completeness
Insure assets & bond key employees - insurance protects against loss; bond (insure) employees handling
lots of cash and other easily transferable assets
Separate recordkeeping from custody of assets - reduces risk of theft or waste of an asset; to commit
fraud employees would need to collude (agree secretly)
Divide responsibility for related transactions - responsibility for a transaction is divided between at least
2 individuals; work of one person acts as a check on the other person; helps prevent fraud or errors
(separation or segregation of duties)
Apply technological controls - cash registers make an electronic record of each sale; time clocks record
exact time employee begins and ends work; ID scanners limit access to authorized individuals
Perform regular and independent reviews - to ensure procedures are followed; preferably done by
auditors not directly involved in the activities; auditors evaluate the efficiency and effectiveness of the
internal controls
Explain what the term "liquidity" means when it is used to describe a business. - ANSWERSLiquidity is a
measure of how quickly and easily an asset can be converted to cash without losing significant value
The liquidity of a business is a measure of its capacity to pay any liabilities it owes with liquid assets
currently on hand
, List examples of various items included in the business measure of "cash". - ANSWERSCash includes
currency, coins, deposits in bank accounts, customer checks, certified checks, & money orders
Define the phrase "cash equivalents" and describe how these amounts are reported in the financial
statements. - ANSWERSShort term, highly liquid investment assets that are readily convertible into
known amounts of cash and have maturity periods of no more than 90 days
Normally reported on the balance sheet combined with cash
Identify two primary business goals of cash management. - ANSWERSPlan cash receipts so there is
enough cash on hand to pay bills when due
Keep a minimum level of cash on hand to fund operations
List 5 cash management strategies commonly used by businesses. - ANSWERSEncourage collection of
receivables
-Offer discounts to customers for quick payment
Delay payment of liabilities
-Wait to pay bills until the last day allowed
Keep only necessary assets
-Rent occasionally used assets when needed
-Lease expensive assets instead of buying them
Plan expenditures to coincide with money availability
-Consider seasonal cycles & other business cycles that generate cash
Invest excess cash to generate returns
-Excess cash invested in productive assets that increase needed capacity
-Seasonal cash can be invested in short term investments to generate interest
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