If a cash register’s record shows $550 but the count of cash in the register is $555, then when you prepare the journal entry do you debit or credit “cash over and short?You would credit “Cash over and short” in this example. If you are short on cash then you debit.Chapter 9: Accounting for ReceivablesRETL 261 1st EditionExam # 3 Study Guide Chapters 8-11Chapter 8: Cash and Internal Controls True or FalseProper internal control means that responsibility for a task is clearly established and assigned to one person.True Technology such as cash registers, check protectors, time clocks and personal identification scanners can improve internal control.TrueGood internal control dictates that a person who controls an asset also maintains that asset's accounting records.FalseSeparation of duties divides responsibility for a transaction or a series of related transactions between two or more individuals or departments. Separation of duties reduces the risk of error and fraud.TrueA voucher system is a set of procedures and approvals designed to control cash disbursements and the acceptance of obligations.TrueWhat are the two limitations of Internal Controls?1. Human Error2. Human FraudIf a cash register’s record shows $550 but the count of cash in the register is $555, then when you prepare the journal entry do you debit or credit “cash over and short?You would credit “Cash over and short” in this example. If you are short on cash then youdebit. Chapter 9: Accounting for ReceivablesWhat is an account receivable?A receivable is an amount due from another party.What is a note receivable?A written promise between the creditor and their buyer. This is usually used for bigger ticket items.What are the two methods used to account for bad debts?The Direct Write-Off Method and the Allowance Method.True or FalseThe Direct Write-Off method violates the matching principle, but is 100% accurate.TrueAn allowance account is a contra asset account.TrueThe formula for computing interest on a note is principal of the note times the annual interest rate times time expressed in fraction of year.TrueAccounts Receivable Turnover = Net Sales/Average Accounts ReceivableTrueNotes receivable are always classified as current liabilities.FalseWhen computing interest, if the note is expressed in days then you base a year on 360 days because of the “banker’s rule.”True Chapter 10: Plant Assets, Natural Resources, and IntangiblesTrue or FalsePlant assets refer to intangible assets that are used in the operations of a business.FalseDepreciation measures the actual decline in market value of an asset.FalseDepreciation expense is calculated using estimates of an asset's salvage value and useful life.TrueLand is depreciated.FalseLand improvements are depreciated.TrueHow do you calculate straight-line depreciation?(Cost – Salvage Value)/ Useful life How do you calculate Units of Production Depreciation?1. (Cost – Salvage Value)/ Units of Production = Depreciation per unit2. Depreciation per unit X Units produced in period = Depreciation expenseOrdinary repairs are classified as Revenue and betterments and extraordinary repairs are classified as Capital. Chapter 11: Current Liabilities and Payroll AccountingHow do you classify whether a liability is current or long-term?A current liability is expected to be paid within a year or less. A long-term liability is not expected to be paid within a year. What are the three types of Contingent Liabilities?1. Probable2. Possible3. RemoteTrue or FalseThe full disclosure principle requires the reporting of contingent liabilities that are reasonably possible.TrueEmployers pay amounts equal to that withheld from the employee’s gross payTrueGross pay is the amount of money you make before taxes are deducted from your salary.TrueNet pay is the amount of money you make after taxes are deducted.TrueFICA taxes include social security. TrueA self-employed person is exempt from FICA taxes.FalseWhat is a 1040?An official document that U.S. taxpayers use to file their annual income tax return. What is a W-2?Your W-2 form reports the amount of federal, state, and other taxes that were withheld from your paycheck. What is a W-4?It is the tax form used by your employer to withhold the proper amount of federal incometax from your