Deck 8: Banking Procedures and Control of Cash

Question 1

An example of an internal control is

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

Answer 1

D

Question 2

Once an effective internal control system is in place, monitoring employees and systems is no longer required.

Answer 2

False

Question 3

The objectives of internal control are to ensure efficient operations and provide reasonable assurance of all of the following EXCEPT

A) business information is accurate.
B) assets are safeguarded and used for business purposes.
C) employees and managers comply with laws and regulations.
D) profits are maximized while minimizing spending.

Answer 3

D

Question 4

The drawer writes the cheque.

Question 5

Internal control over a company's assets should include the following policy:

A) Responsibilities and duties of employees will be divided.
B) All cash receipts will be deposited into the bank the same day they arrive.
C) All cash payments will be made by cheque (except petty cash).
D) All of these answers are correct.

Question 6

Endorsing a cheque

A) guarantees payment.
B) transfers the right to deposit or transfer cash.
C) cancels the transaction.
D) All of these answers are correct.

Question 7

When the bank pays a cheque 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 8

Technological controls can include all of the following EXCEPT

A) using digital keycards for access.
B) restricting social media access at work.
C) requiring passwords on all systems.
D) using personal identification scanners.

Question 9

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

Question 10

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

Question 11

When a bank debits your account, it is decreasing the balance.

Question 12

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

Question 13

Company policy for internal control should include all of the following EXCEPT

A) employees will be rotated through a variety of assignments.
B) all cheques are signed by the owner (or responsible employee) after receiving authorization to pay from the departments concerned.
C) at time of payment, all supporting invoices or documents will be stamped "paid."
D) one employee should have the total responsibility for approving purchases, authorizing payments, and signing cheques.

Question 14

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

Question 15

A deposit received by the bank will include

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

Question 16

When a company transfers funds among parties electronically, without the use of paper cheques it is called

A) e-commerce.
B) automated reconciliation.
C) cheque truncation.
D) electronic funds transfer.

Question 17

The person or company to whom a cheque is payable is called the

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

Question 18

The cheque is written and signed by the

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

Question 19

A signature card is kept in the bank files so that possible forgeries could be spotted.

Question 20

The drawee is the

A) person who writes the cheque.
B) bank that drawer has an account with.
C) person to whom the cheque is payable.
D) person who reconciles the account.

Question 21

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

Question 22

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

Question 23

A cheque stub is used to record journal entries and keep track of bank balances.

Question 24

When a deposit is completed it should also be recorded on the current cheque stub.

Question 25

Debit cards can be used in many locations in exactly the same manner as a credit card.

Question 26

Petty Cash ________ ________ ________ ________

Question 27

When a debit card is used to pay for a purchase the amount is deducted directly from your chequing account.

Question 28

A signature card is kept in the bank files so that possible forgeries could be spotted.

Question 29

What is the purpose of internal control?

Question 30

When a credit card is used to pay for a purchase the amount is deducted directly from your chequing account.

Question 31

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

Question 32

The drawer writes the cheque.

Question 33

External control includes control over the assets as well as ways of monitoring the company's operations.

Question 34

A deposit receipt usually separates cheques deposited from coin and currency deposited.

Question 35

Electronic funds transfers are a growing trend in Canada.

Question 36

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

Question 37

The use of physical cash in the business environment is increasing.

Question 38

The drawee of a cheque is normally the bank.

Question 39

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

Question 40

Misc. Expense ________ ________ ________ ________

Question 41

Outstanding cheques

A) have been subtracted on the bank records but not the chequebook records.
B) have not been presented to the bank for payment and have not been subtracted from the company's ledger account.
C) have not been presented to the bank for payment but have been subtracted in the ledger account.
D) have been returned to the business for nonpayment.

Question 42

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

A) outstanding cheques.
B) canceled cheques.
C) cheques in process.
D) blank cheques.

Question 43

SWIFT codes are used for

A) identifying a payee in another country.
B) speeding up deposits.
C) identifying a particular branch of a bank worldwide.
D) making certain any cheques written are cleared as soon as possible.

Question 44

Information to calculate the adjusted cash balance for Fran's Food Services is as follows: Cash balance per general ledger $2,000
Customer's cheque returned--NSF 75
Bank service charges 40
Deposits in transit 500
Outstanding cheques 700
Customer's note collected by bank 645

A) $2,330
B) $2,430
C) $2,530
D) $2,630

Question 45

Calculate, from the following information accumulated by Bob Verna, the adjusted cash balance at the end of July. Bank statement ending cash balance $6,000
General ledger cash balance ending 8,500
Bank monthly service charge 90
Deposits in transit 5,000
Outstanding cheques 3,000
NSF cheque returned with bank statement 410

A) $6,000
B) $8,500
C) $8,000
D) $11,000

Question 46

Discuss reasons why a manager would be concerned about developing a system of internal control over the cash receipts and cash payments of the business. Describe at least five company policies that would be included in an internal control system.

Question 47

An example of electronic funds transfer is

A) a transfer of funds without the use of paper cheques.
B) a transfer of funds by writing a cheque.
C) the same as a deposit in transit.
D) All of these are correct.

Question 48

Change Fund ________ ________ ________ ________

Question 49

Advantages of online banking include

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

Question 50

The bank statement shows

A) the beginning bank balance of the cash at the start of the month.
B) the cheques the bank has paid and any deposits received.
C) any other charges or additions to the bank balance.
D) All of these answers are correct.

Question 51

Cash Short & Over ________ ________ ________ ________

Question 52

Delivery Expense ________ ________ ________ ________

Question 53

Determine the adjusted cash balance per bank for Egg Packaging on April 30, from the following information: Cash balance on the bank statement $2,500
Customer's cheque returned-NSF 500
Customer's note collected by the bank 600
Deposits in transit, April 30 1,400
Outstanding cheques, April 30 2,650

A) $1,250
B) $1,100
C) $1,550
D) $1,350

Question 54

The bank statement included bank charges. On the bank reconciliation, the 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 55

Calculate, from the following information accumulated by Vera Freese, the adjusted cash balance at the end of April. Bank statement ending cash balance $3,000
General ledger cash balance ending 4,250
Bank monthly service charge 45
Deposits in transit 2,500
Outstanding cheques 1,500
NSF cheque returned with bank statement 205

A) $3,000
B) $4,250
C) $4,000
D) $5,500

Question 56

Which item is NOT an example of an advantage of Online Banking?

A) Phishing
B) Perform bank reconciliation more often than monthly
C) Transactions confirmed quickly
D) Manage all accounts from one secure site

Question 57

Marcella Industries 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 58

A nonsufficient funds cheque 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) None of these answers are correct.

Question 59

How would outstanding cheques 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 ignored.

Question 60

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

A) deposits in transit.
B) late deposits.
C) deposits on hold.
D) outstanding deposits.

Question 61

The journal entry to reverse the entry of a customer's nonsufficient funds cheque would include a

A) debit to Cash.
B) credit to Cash.
C) debit to Accounts Payable.
D) credit to Accounts Receivable.

Question 62

The June bank statement for Paul's Plumbing shows a balance of $3,150, but the balance per books shows a cash balance of $3,990. Other information includes 1. Cheques outstanding totaled $970.
2) Bank service charges were $25.
3) A cheque for $100 to pay the telephone bill was recorded on the books as $10.
4) Included on the bank statement was an NSF cheque for $150 plus an NSF fee of $15.
5) Deposits in transit were $1,115.
The adjusted cash balance at the end of June should be

A) $4,405.
B) $3,710.
C) $3,990.
D) $4,040.

Question 63

Bank service charges 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 64

The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes 1. A cheque for $200 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 $300 plus interest of $30.
3) Cheques outstanding totaled $360.
4) Bank service charges were $50.
5) Deposits in transit were $2,140.
Which item(s) will require a journal entry to update the balance in the Cash account?

A) Cheques 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 Accounting Services
D) None of these answers are correct.

Question 65

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 66

The May bank statement for Lawn Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes 1. A cheque for $200 to pay the electric bill was recorded incorrectly on the books as $20.
2) Included on the bank statement was a note collected by the bank for $300 plus interest of $30.
3) Cheques outstanding totaled $360.
4) Bank service charges were $50.
5) Deposits in transit were $2,140.
The adjusted cash balance at the end of May should be

A) $9,810.
B) $7,620.
C) $7,980.
D) $8,080.

Question 67

An error in recording a $51 deposit as $15 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 68

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

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

Question 69

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

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

Question 70

The bank added 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) addition to the balance per bank.
D) subtraction from the balance per bank.

Question 71

Information to calculate the adjusted cash balance for Everest Climbing Gear is as follows: Cash balance per general ledger $4,000
Customer's cheque returned--NSF 150
Bank service charges 80
Deposits in transit 1,000
Outstanding cheques 1,400
Customer's note collected by bank 1,290

A) $4,660
B) $4,860
C) $5,060
D) $5,260

Question 72

A payment for $32 is incorrectly recorded on the chequebook stub as $23. The $9 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 73

If the owner of Kelly 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) Debit Revenue; credit Cash
D) Debit cash; credit Revenue

Question 74

Bank interest earned on a chequing 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 75

The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes 1. A cheque for $200 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 $300 plus interest of $30.
3) Cheques outstanding totaled $360.
4) Bank service charges were $50.
5) Deposits in transit were $2,140.
Which item should be added to the company's book balance during the bank reconciliation?

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

Question 76

The May bank statement for Accounting Services shows a balance of $6,300, but the balance per books shows a cash balance of $7,980. Other information includes 1. A cheque for $200 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 $300 plus interest of $30.
3) Cheques outstanding totaled $360.
4) Bank service charges were $50.
5) Deposits in transit were $2,140.
Which item(s) should be subtracted from the balance per books?

A) Bank service charge
B) Cheques outstanding and bank service charge
C) Bank service charge and the note collected by the bank
D) None of the above are correct.

Question 77

Which of the following bank reconciliation items would NOT be reflected in a journal entry?

A) Bank service charges
B) Collection of a note by the bank
C) Outstanding cheques
D) NSF customer cheque

Question 78

A payment for $49 is incorrectly recorded in the accounting records as $94. 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 79

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

A) assets to be overstated.
B) assets 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 80

The bank charged another company's cheque against 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.