Question

1. The COSO Framework describes 5 components of internal control. What is the purpose of internal controls from a financial accounting perspective?

1. To guarantee no fraud will occur in the organization.
2. To help safeguard the company's assets.
3. To help improve the accuracy and reliability of the accounting information.
4. To prevent collusion.

Group of answer choices

1 and 4

1, 2, and 3

2 and 3

2, 3, and 4

1, 2, 3, and 4

2. Which of the following is considered a Cash Equivalent?

Group of answer choices

Shares of stock in Amazon.com

90 day supply of paper

Account receivable to be collected in 30 days

90 day Certificate of Deposit

3. Which of the following transactions is an investing activity that would affect the statement of cash flows?

Group of answer choices

Purchasing equipment by signing a loan.

Purchasing equipment with a credit card.

Purchasing equipment on account.

Purchasing equipment with a check.

4. Statement of cash flows…which of the following is not an operating cash flow?

Group of answer choices

Receive cash from a customer

Purchase supplies on account

Paid the electric bill

Paid employee wages

5.The indirect method of the Statement of Cash flows:

Group of answer choices

will show net income as the first item in the operating activity section.

will show where cash came from and went from operating activities.

will show dividends declared during the year in the investing activity section.

will show the amount the company purchased of long term assets in the financing activity section.

Answer 1

1. Option ( C ).

Internal controls are the rules,mechanisms and procedures implemented by the company to ensure integrity of financial and accounting information,promote accountability prevent fraud etc.The purpose of internal controls from financial accounting perspective is to safeguard the assets of the company, improve accuracy and reliability of accounting information, to prevent collusion.

2. Option ( C ).

Cash equivalents is that part of current asset which can be converted into cash within 30 days. Accounts receivable to be collected in 30 days is a part of cash equivalents.

3. Option ( C ).

Cash flows from investing activities provides an account of cash used in purchase of non current assets or long term assets that will deliver value in future.

4. Option ( C ).

Cash received from customer, purchase of supplies on account and payment of wages appear under operating activities of direct method of cash flow statement except payment of electricity bill.

5. Option ( A ).

Under indirect method of cash flow statement, net income or net profit is shown as the first item under operating activities section of cash flow statement.