Deck 6: Banking Procedure and Control of Cash

Question 1

An example of an internal control is NOT:

A) the use of bank account.
B) the use of unnumbered checks.
C) all checks written must have reference source documents.
D) All of these answers are correct.

Answer 1

B

Question 2

Advantages of on-line banking include:

A) convenience.
B) transaction speed.
C) effectiveness.
D) All of the above are correct.

Answer 2

D

Question 3

Using correct cash handling procedures, deposits should be made by the end of the week.

Answer 3

False

Question 4

A deposit received by the bank will:

A) debit the company's bank account.
B) credit the company's bank account.
C) debit the cash account on the company's books.
D) credit the Accounts Payable account on the company's books.

Question 5

A signature card is kept by the bookkeeper in case of spotting possible forgeries at the bank.

Question 6

When the bank pays a check written by the company, it would:

A) credit the customer's bank account.
B) debit the customer's bank account.
C) debit the cash account on the company's books.
D) No increase or decrease is made to the company's bank account.

Question 7

A restrictive endorsement on a check:

A) can be further endorsed by someone else.
B) is the safest endorsement for businesses.
C) permits the bank to use its best judgment.
D) must be endorsed by the company treasurer.

Question 8

A full endorsement on a check:

A) is the same as a blank endorsement.
B) can be endorsed only by the person or company named in the original endorsement.
C) is the safest endorsement for businesses.
D) does none of the above.

Question 9

The check is written and signed by the:

A) drawer.
B) drawee.
C) bank teller.
D) None of the above

Question 10

When a bank credits your account, it is increasing the balance.

Question 11

The drawee is the:

A) person who writes the check.
B) bank that the drawer has an account with.
C) the person to whom the check is payable.
D) person named as the co-signer.

Question 12

One internal control safeguard is to assign all the duties of receiving, depositing, and recording cash to the same employee.

Question 13

A signature card shows the signature of only the person who authorizes others in the company to sign checks.

Question 14

The first two numbers of the ABA code listed on the check represent:

A) the Federal Reserve District.
B) the code indicating business or personal account.
C) the routing number.
D) the account number.

Question 15

Company policy for internal control should include all of the following except:

A) Employees will be rotated twice a year.
B) Monthly bank statements should be sent to and reconciled by the same employees who authorize payments and write checks.
C) The owner (or responsible employee) signs all checks after receiving authorization to pay from the departments concerned.
D) At time of payment, all supporting invoices or documents will be stamped "paid."

Question 16

Endorsing a check:

A) guarantees payment.
B) transfers the right to deposit or transfer cash.
C) allows a check to be deposited only.
D) None of these answers are correct.

Question 17

If the written amount on the check does NOT match the amount expressed in figures, the bank may:

A) pay the amount written in words.
B) return the check unpaid.
C) contact the drawer to see what was meant.
D) All of the above are correct choices.

Question 18

A blank endorsement on a check:

A) can be further endorsed by someone else.
B) cannot be further endorsed by someone else.
C) is the safest type of endorsement.
D) permits only the original endorser to get the money.

Question 19

The person or company to whom a check is payable is called the:

A) payer.
B) drawer.
C) drawee.
D) payee.

Question 20

Internal control over a company's assets should NOT include the following procedures:

A) Responsibilities and duties of employees will be divided.
B) All cash receipts will be accumulated until significant enough for a major deposit.
C) All cash payments will be made by check (except petty cash).
D) All of these answers are correct.

Question 21

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example:

Question 22

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example:

Question 23

The drawee of a check is normally the company that issues the check.

Question 24

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example:

Question 25

On a bank reconciliation, deposits added to the bank side are called:

A) deposits in transit.
B) bank collections.
C) electronic funds transfer.
D) outstanding deposits.

Question 26

Scotch Services received a credit memorandum from the bank. During the bank reconciliation they should:

A) increase their cash account on the company's books.
B) decrease their cash account on the company's books.
C) increase the ending cash balance on the bank statement.
D) decrease the ending cash balance on the bank statement.

Question 27

The bank statement does NOT show:

A) the beginning bank balance of the cash at the start of the month.
B) the checks the bank has paid and any deposits received.
C) any other charges or additions to the bank balance.
D) outstanding checks.

Question 28

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example:

Question 29

A deposit ticket usually combines checks deposited with coin and currency deposited.

Question 30

The drawee writes the check.

Question 31

A nonsufficient funds check was returned to your company. How does the bank treat this on your bank statement?

A) It is added to the bank balance.
B) It is shown as a debit memo.
C) It is shown as a credit memo.
D) It is shown as an increase to the bank's cash balance.

Question 32

Outstanding checks:

A) have been deducted from the bank balance but not the checkbook records.
B) have not been presented to the bank for payment and have not been subtracted from the checkbook.
C) have not been presented to the bank for payment but have been subtracted in the checkbook.
D) have been returned to the business for nonpayment.

Question 33

List and describe some of the electronic conveniences that we are now provided when doing our banking.

Question 34

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2 the normal balance for the account, in Column 3 the financial statement on which the account balance is reported, and in Column 4 the nature of the account (permanent/temporary).
Example:

Question 35

The bank statement included bank charges. On the bank reconciliation, this item is:

A) an addition to the balance per company books.
B) an addition to the balance per bank statement.
C) a deduction from the balance per bank statement.
D) a deduction from the balance per company books.

Question 36

Phishing occurs when a bank customer receives an email requesting personal information.

Question 37

The drawee of the check is the person receiving the money.

Question 38

What is the purpose of internal control?

Question 39

Checks that have been processed by the bank and are no longer negotiable are:

A) outstanding checks.
B) canceled checks.
C) voided checks.
D) deposits in transit.

Question 40

List at least five company policies that would be included in an internal control system.

Question 41

Bank service charges would be shown on a bank reconciliation as:

A) addition to the balance per bank statement.
B) deduction from the balance per bank statement.
C) addition to the balance per books.
D) deduction from the balance per books.

Question 42

Bank interest earned on a checking account would be shown on a bank reconciliation as:

A) added to the balance per bank statement.
B) deducted from the balance per bank statement.
C) added to the balance per books.
D) deducted from the balance per books.

Question 43

The May bank statement for Consulting Services shows a balance of $7,200, but the balance per books shows a cash balance of $9,100. Other information includes: 1. A check for $170 to pay the electric bill was recorded on the books as $20.
2) Included on the bank statement was a note collected by the bank for $450 plus interest of $30.
3) Checks outstanding totaled $290.
4) Bank service charges were $60.
5) Deposits in transit were $2,460.
Which item should be added to the company's book balance during the bank reconciliation?

A) Deposit in transit
B) Outstanding check
C) Bank service charge
D) Note collected by the bank

Question 44

A payment for $51 is incorrectly recorded on the checkbook stub as $15. The $36 error should be shown on the bank reconciliation as:

A) added to the balance per bank statement.
B) deducted from the balance per bank statement.
C) added to the balance per books.
D) deducted from the balance per books.

Question 45

The May bank statement for Accounting Services shows a balance of $6,200, but the balance per books shows a cash balance of $7,680. Other information includes: 1. A check for $190 to pay the electric bill was recorded on the books as $30.
2) Included on the bank statement was a note collected by the bank for $370 plus interest of $30.
3) Checks outstanding totaled $270.
4) Bank service charges were $50.
5) Deposits in transit were $1,880.
The adjusted cash balance at the end of May should be:

A) $9,560.
B) $7,590.
C) $7,140.
D) $7,810.

Question 46

From the bank reconciliation, no entry was recorded for deposits in transit. This would cause:

A) Accounts Receivable to be overstated.
B) Accounts Receivable to be understated.
C) no impact since deposits in transit are already included in the balance per books.
D) no impact since deposits are not recorded on the books.

Question 47

The journal entry to record the entry of a customer's nonsufficient funds check would include a:

A) debit to Revenue.
B) credit to Cash.
C) debit to Collection Expense.
D) credit to Accounts Receivable.

Question 48

An example of electronic funds transfer is:

A) a transfer of funds without the use of paper checks.
B) a transfer of funds by writing a check.
C) the same as a deposit in transit.
D) the return of a deposited check.

Question 49

How would outstanding checks be handled when reconciling the ending cash balance per the bank statement to the correct adjusted cash balance?

A) They would be added to the balance of the bank statement.
B) They would be subtracted from the balance of the bank statement.
C) They would be added to the balance per books.
D) They would be subtracted from the balance per books.

Question 50

The May bank statement for Tax Services shows a balance of $5,700, but the balance per books shows a cash balance of $7,200. Other information includes: 1. A check for $200 to pay the electric bill was recorded on the books as $30.
2) Included on the bank statement was a note collected by the bank for $440 plus interest of $20.
3) Checks outstanding totaled $270.
4) Bank service charges were $50.
5) Deposits in transit were $2,010.
Which item(s) should be subtracted from the balance per books?

A) Deposits in transit
B) Checks outstanding and bank service charge
C) Bank service charge and the note collected by the bank
D) None of the above is correct.

Question 51

If the owner of Pastel Legal Services forgot to deduct a withdrawal from the balance per books, what entry would be necessary?

A) Debit Cash; credit Withdrawals
B) Debit Withdrawals; credit Cash
C) Customer collection taken by the bank
D) Debit Accounts Receivable; credit Cash

Question 52

The bank would issue a credit memorandum to Marion's Life Management when the bank:

A) receives the deposits in transit.
B) collects a note receivable from a customer.
C) discovers a check that was deposited was returned for nonsufficient funds.
D) issues a company electronic funds payment.

Question 53

Information to calculate the adjusted cash balance for Chris's Company is as follows:

A) $2,910
B) $2,010
C) $2,310
D) $1,840

Question 54

The journal entry to adjust the records from Nothin' But Organization bank reconciliation would include:

A) the total of outstanding checks.
B) deposits in transit.
C) notification from the bank of a customer's NSF check.
D) correction of any errors or omissions on the bank statement.

Question 55

Which of the following bank reconciliation items would be reflected in a journal entry?

A) Error made by the bank
B) Outstanding checks
C) Bank service charges
D) Deposit in transit

Question 56

A payment for $27 is incorrectly recorded on the checkbook stub as $72. The $45 error should be shown on the bank reconciliation as:

A) added to the balance per bank statement.
B) deducted from the balance per bank statement.
C) added to the balance per books.
D) deducted from the balance per books.

Question 57

Determine the adjusted cash balance per bank for Sheryl's Packaging on November 30, from the following information:

A) $1,800
B) $500
C) $1,900
D) $1,600

Question 58

Calculate, from the following information accumulated by Gene Park, the adjusted cash balance at the end of April.

A) $4,110
B) $4,350
C) $4,300
D) $5,410

Question 59

From the bank reconciliation, no entry was recorded for a debit memo for a new check fee expense. This would cause:

A) Cash to be understated.
B) liabilities to be overstated.
C) expenses to be understated.
D) expenses to be overstated.

Question 60

The May bank statement for Rental shows a balance of $6,000, but the balance per books shows a cash balance of $8,000. Other information includes: 1. A check for $190 to pay the electric bill was recorded on the books as $10.
2) Included on the bank statement was a note collected by the bank for $450 plus interest of $30.
3) Checks outstanding totaled $270.
4) Bank service charges were $60.
5) Deposits in transit were $2,510.
Which item(s) will require a journal entry to update the balance in the Cash account?

A) Checks outstanding and deposits in transit
B) Bank service charges, note collected by the bank, and deposits in transit
C) Bank service charges, note collected by the bank, and error made by the Bookkeeper
D) None of these answers is correct.

Question 61

List the various steps and procedures included in the bank reconciliation process.
What are the advantages in preparing a monthly bank reconciliation?

Question 62

Prepare a bank reconciliation as of May 31 from the following information:

Question 63

Deposits that have been added to the bank balance but not the checkbook balance are called deposits in transit.

Question 64

Indicate what effect each situation will have on the bank reconciliation process. Place the number of your choice beside the items listed.
1. Add to bank balance
2. Deduct from bank balance
3. Add to checkbook balance
4. Deduct from checkbook balance
________ a. deposit in transit
________ b. bank service charge
________ c. NSF check
________ d. Check written for $95 recorded on the company's ledger as $59
________ e. Outstanding checks
________ f. Check written for $80 recorded as $800
________ g. Check printing charges
________ h. Interest earned on checking account

Question 65

Determine the unadjusted balance per bank statement given the following:
The balance per general ledger is $200.
There is a credit memo for a note collected, $450.
There is a debit memo for interest expense, $50.
There is a debit memo for a customer's NSF check $425.
Outstanding checks amount to $2,000.
This month's service charge amounts to $50.
Deposits in transit amount to $1,500.
$ ________

Question 66

Canceled checks are negotiable at the bank for the face value.

Question 67

When adjustments are made to the bank balance when completing a bank reconciliation, a journal entry is needed to bring the bank balance up to date.

Question 68

If a check marked NSF is returned from the bank, an adjusting entry crediting Cash is needed.

Question 69

Construct the bank reconciliation for Milton Company as of July 31, from the following information:

Question 70

Any adjustment to the depositor's records because of an item on the bank statement requires a journal entry.

Question 71

An error, on the company's books, in recording a $52 deposit as $25 would be included on the bank reconciliation as a(n):

A) addition to the balance per bank.
B) subtraction from the balance per bank.
C) addition to the balance per books.
D) subtraction from the balance per books.

Question 72

A bank service charge would be included on the bank reconciliation as a(n):

A) addition to the balance per books.
B) subtraction from the balance per books.
C) addition to the balance per bank.
D) subtraction from the balance per bank.

Question 73

On a bank reconciliation, outstanding checks are deducted from the balance per the books.

Question 74

The bank charged another company's deposit to our account. This would be included on the bank reconciliation as a(n):

A) addition to the balance per books.
B) subtraction from the balance per books.
C) subtraction from the balance per bank.
D) addition to the balance per bank.

Question 75

The bank deducted another company's check from our account. This would be included on the bank reconciliation as a(n):

A) addition to the balance per books.
B) subtraction from the balance per books.
C) addition to the balance per bank.
D) subtraction from the balance per bank.

Question 76

Transferring money without paper checks is called electronic funds transfer.

Question 77

Deposits in transit result because of a timing difference between the bank records and checkbook records.

Question 78

Determine the reconciled bank balance given the following:
The balance per bank statement is $ 195.
The balance per general ledger is $192.
There is a credit memo for a note collected, $408.
There is a credit memo for interest earned, $25.
There is a debit memo for a customer's NSF check $350.
Deposits in transit, $850.
Outstanding checks amount to $845.
This month's service charge amounts to $50.
There is a debit memo for check printing fees, $25.
$ ________

Question 79

Construct the bank reconciliation for Bill's Tutoring, as of October 31, from the following information:

Question 80

From the following information, prepare the bank reconciliation for Paula's Photography Studio as of June 30.