Unit 2: Assets

Answer: B — Using a safe or vault is a physical safeguard over cash, meaning it provides a secure, physical barrier to protect cash from theft or loss. This control measure directly prevents unauthorized access to cash, reducing the risk of misappropriation. In contrast, requiring two signatures for checks is a procedural control, not a physical one.

Answer: E — The step that involves verifying the accuracy of the company's cash records is the Independent verification of cash records, which means reviewing the company's cash transactions to ensure they are accurate and complete. This process helps detect any errors or discrepancies in the company's records. In contrast, listing deposits in transit (Option A) only identifies pending deposits, whereas Independent verification of cash records examines the entire cash account for accuracy.

Answer: B — Intangible assets with indefinite lives are not amortized, but rather Tested annually for impairment, meaning their value is reviewed each year to determine if it has decreased due to factors like market changes or loss of rights. This process ensures that the asset's carrying value is not overstated. In contrast, amortizing over a specific period, as in option A, would be incorrect because it implies a finite life.

Answer: B — Non-current assets refer to resources expected to benefit a company over a long period, typically more than one year. These assets, such as property or equipment, are not easily convertible to cash and are intended to generate value in future periods. In contrast, current assets are short-term and expected to be used or converted to cash within a year. Non-current assets are the correct term because they encompass resources that will provide benefits beyond the current period.

Answer: B — Deposits in transit refer to funds that a company has deposited but the bank has not yet recorded, typically because the deposit is still being processed. This occurs when a company makes a deposit at the end of the day, but the bank doesn't credit the account until the next day. In contrast, outstanding checks involve withdrawals, not deposits. Deposits in transit are a key component of bank reconciliations, ensuring accuracy by accounting for these pending additions.