Deck 7: Accounting for Cash

Question 1

Every person authorized to sign checks for a business must complete and sign a signature card for the bank.

Answer 1

True

Question 2

A depositor may endorse checks with a rubber stamp.

Answer 2

True

Question 3

The key documents and forms required in opening and using a checking account are the signature card,deposit tickets,checks,and bank statements.

Answer 3

True

Question 4

A cash shortage is entered as a debit to Cash Short and Over and a credit to Cash.

Question 5

On a deposit ticket,checks should be listed in numerical order.

Question 6

The term "cash" has several different meanings.

Question 7

A restrictive endorsement makes a check payable to any bearer.

Question 8

The depositor who orders the bank to pay a certain amount of money is known as the drawee.

Question 9

To a business,cash includes currency,coins,checks,money in the checking accounts,money orders,and bank cashier's checks.

Question 10

To establish a change fund,Cash should be credited and Change Fund should be debited.

Question 11

A restrictive endorsement means that the check is payable to any bearer.

Question 12

Cash usually means only currency and coins.

Question 13

On any given day,it is unlikely that the balance in the cash account on the depositor's general ledger (or books)will be the same as the bank balance.

Question 14

The person directed to receive the money indicated by a check is known as the payee.

Question 15

A check is a document ordering the depositor to pay cash from the bank's account.

Question 16

A special ledger account entitled "Change Fund" is used to keep track of day-to-day shortages and overages of cash.

Question 17

Businesses commonly use cash registers with tapes that accumulate a record of the day's cash receipts.

Question 18

The bank in which the depositor has money on deposit is known as the drawer.

Question 19

A depositor is not responsible or liable to the bank for items deposited that are not honored when presented for payment.

Question 20

It is good business policy that all cash and cash items received be deposited daily in a bank.

Question 21

In reconciling the bank statement,the outstanding checks are added to the balance shown on the bank statement.

Question 22

A debit journal entry to the cash short and over account is used to record a cash shortage.

Question 23

When it is necessary to replenish the petty cash fund,the petty cashier prepares a statement of payments.

Question 24

A special form of receipt showing the name of the payee,the purpose of the payment,and the account to be charged for each petty cash payment is known as a petty cash voucher.

Question 25

Outstanding checks are checks issued that have not yet been presented to the bank for payment.

Question 26

When a check is written to replenish the petty cash fund,it is entered in the journal by debiting the proper accounts indicated in the Distributions columns of the petty cash record and by crediting Cash Over and Short.

Question 27

Cash receipts of $719 and a cash count of $715 would indicate a cash overage.

Question 28

Payments from the petty cash fund should not be made without obtaining some sort of receipt in return.

Question 29

Each check should be identified by its

A) AAB number.
B) MBA number.
C) CPA number.
D) ABA number.

Question 30

If the depositor's book balance is not the same as the bank's book balance,an error has occurred.

Question 31

Once an entry is made to establish a change fund,no other entries are made to this account.

Question 32

A check deposited that is not paid because the drawer did not have sufficient funds is called an NSF check.

Question 33

A receipt called a petty cash voucher should be prepared for every payment from the petty cash fund.

Question 34

The petty cash fund should be replenished only at the end of each accounting period so that the accounts are brought up-to-date.

Question 35

The petty cash payments record is a special journal that takes the place of entering these transactions in the two-column journal.

Question 36

Posting must be done from the petty cash payments record.

Question 37

The check written to establish the petty cash fund is recorded in the journal by crediting Cash and debiting Petty Cash.

Question 38

If the cash short and over account has a debit balance at the end of the fiscal year,the balance represents a revenue.

Question 39

If the cash short and over account has a credit balance at the end of the fiscal year,the balance represents an expense or loss.

Question 40

The difference between the balance in the cash account on the depositor's books and the bank's books is usually due to errors.

Question 41

A debit to Accounts Receivable for $50 and a credit to Cash for $50 would be an accurate journal entry to record

A) electronic funds transfers (EFTs).
B) not sufficient funds (NSF)checks.
C) petty cash.
D) ATM deposits.

Question 42

To reconcile the bank statement,which of the following amounts would be subtracted from the checkbook balance?

A) service charge
B) outstanding checks
C) deposits in transit
D) amounts collected by the bank for the depositor's account

Question 43

A check involves three parties.The bank in which the drawer has money on deposit is called the

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

Question 44

To use an ATM machine,the depositor must have a

A) Bank number.
B) PIN number.
C) BIN number.
D) TIN number.

Question 45

The bank statement for a checking account normally shows the

A) amounts of deposits to be made.
B) amount of deposits and other credits added during the period.
C) checks written but not yet cashed.
D) amounts to be collected by the bank for the depositor's account.

Question 46

To reconcile the bank statement,which of the following amounts would be subtracted from the bank statement balance?

A) service charge
B) outstanding checks
C) deposits in transit
D) amounts collected by the bank for the depositor's account

Question 47

The process of bringing the book and the bank balance into agreement is called

A) reconciling the bank statement.
B) proving the cash.
C) preparing a statement of payment.
D) preparing a statement of disbursements.

Question 48

To reconcile the bank statement,which of the following amounts would be subtracted from the checkbook balance?

A) service charge
B) outstanding checks
C) deposits in transit
D) amounts collected by the bank for the depositor's account

Question 49

Whenever the bank mails a credit memo to the depositor indicating the amount of interest credited to the account,the transaction that would be entered in the accounting records of the depositor would include

A) debiting Interest Earned and crediting Cash.
B) debiting Interest Expense and crediting Cash.
C) debiting Cash and crediting Interest Earned.
D) debiting Cash and crediting Interest Expense.

Question 50

A petty cash fund of $200 has $17 in cash,$180 in petty cash vouchers,and $3 in miscellaneous receipts not included with the petty cash vouchers.The proper journal entry to replenish the fund would include a credit to Cash for

A) $3.
B) $17.
C) $180.
D) $183.

Question 51

If the person who is named as payee on a check transfers the right to receive the money by signing his/her name on the back of the check,the signature is called a

A) restrictive endorsement.
B) dishonored endorsement.
C) regular endorsement.
D) blank endorsement.

Question 52

The petty cash payments record indicates classified expenditures as follows: Automobile Expense,$20; Supplies Expense,$12; Postage Expense,$6; and Miscellaneous Expense,$5.The journal entry to replenish the petty cash fund would include a credit to Cash for

A) $38.
B) $5.
C) $11.
D) $43.

Question 53

To sign the back of a check with the name of the company and "Pay to any bank" is an example of a

A) restrictive endorsement.
B) signature card.
C) blank endorsement.
D) canceled check.

Question 54

On a bank reconciliation,checks issued during the period that were not presented to the bank for payment before the bank statement was prepared are known as

A) NSF checks.
B) outstanding checks.
C) deposits in transit.
D) dishonored checks.

Question 55

A check involves three parties.The person directed to receive the money is called the

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

Question 56

On a bank reconciliation,deposits that were not entered by the bank before the bank statement was prepared are known as

A) NSF deposits.
B) restrictive deposits.
C) deposits in transit.
D) unrecorded deposits.

Question 57

A special form of receipt showing the name of the payee,the purpose of the payment,and the account to be charged for each petty cash payment is known as a

A) petty cash voucher.
B) petty cash check.
C) petty cash document.
D) petty cash register.

Question 58

In reconciling a bank statement,the bank statement balance is $1,000 and the balance per books is $1,205.A bank service charge is $5; a deposit in transit totals $500; and outstanding checks total $300.The journal entry for a bank service charge would include

A) debiting Cash and crediting Miscellaneous Expense.
B) debiting Cash and crediting Owner's Capital.
C) debiting Accounts Payable and crediting Cash.
D) debiting Miscellaneous Expense and crediting Cash.

Question 59

A check involves three parties.The person who orders the bank to pay a certain amount of money is called the

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

Question 60

If,in the effort to prove cash,a shortage is found,the amount is treated as a(n)

A) cash receipts transaction.
B) petty cash transaction.
C) revenue earned transaction.
D) expense.

Question 61

The following information relates to the bank account of Doug's Sky Diving Supply Store on June 30. $\begin{array}{llr} \text { Balance per bank statement } &&\$5,327\\ \text {Balance per books as of June 30 } &&9,265\\ \text {Outstanding checks: } &\\ \# 1007 & \$ 241 \\\# 1008 & 67 \\\# 1009 & 597\\\text { Deposits in transit } & 229 \\& 4,111 \\\text { Bank service charges } & 98 \\\text { NSF check } & 412 \\\text { Credit memo for interest earned } & 16 \end{array}$

Error: Check written and recorded by bank as $454 was subtracted from the checkbook as $445.
The check was used to pay the telephone bill.
Required:
Prepare a bank reconciliation as of June 30.

Question 62

A special multi-column record that supplements the regular accounting records and from which no posting is done is called a

A) bank reconciliation form.
B) petty cash payment record.
C) journal.
D) ledger.

Question 63

Cash Sales from the cash register tapes totaled $882.There is a change fund of $100.The cash count indicates that $984 is in the cash drawer.What journal entry would be required?

A) debit Miscellaneous Expense for $2; credit Cash Short and Over for $2
B) debit Cash for $982,Cash Short and Over for $2; credit Revenues for $984
C) debit Cash Short and Over for $2; credit Miscellaneous Expense $2
D) debit Cash for $884; credit Revenues for $882,and Cash Short and Over for $2

Question 64

Using the following information,prepare the journal entries to:
a.
Establish a $200 petty cash fund on January 2.
b.
Reimburse the petty cash fund at the end of the month.
$\begin{array}{lclc} \underline{\text { Date}}& \underline{\text { Voucher No. }}& \underline{\text { Purpose }} & \underline{\text { Amount }}\\\text { Jan. }\quad2&1 & \text { Office supplies } & \$ 15 \\\quad\quad\quad6 & 2 & \text { Withdrawal by owner } & 20 \\\quad\quad\quad7 & 3 & \text { Lunch with client } & 35\\\quad\quad\quad7 & 4 & \text { Postage } & 12 \\\quad\quad\quad8 & 5 & \text { Donation to United Way } & 25 \\\quad\quad\quad12 & 6 & \text { Telephone repair } & 32 \\\quad\quad\quad23 & 7 & \text { Office supplies } & 15 \\\quad\quad\quad28 & 8 & \text { Lunch with client } & 40\end{array}$

Question 65

Sal's Surf Shop deposits all receipts in the bank and makes all payments by check.On July 31 the cash account had a balance of $6,105.42.The bank statement on July 31 reported a balance of $4,146.46.Upon comparing the bank statement to the books,the following items were found.
?
?
a. A. bank debit memo issued for an NSF check from a customer of $\$ 21.25$ .
b. Abank credit memo issued for interest of $\$ 8.50$ earned during the month.
c. During the evening of July 31 , a deposit of $\$ 1,948.25$ was made, which is not shown on the bank statement.
d. A. bank debit memo issued for $\$ 18.50$ for bank service charges.
e. Checks for the amounts of $\$ 34.00, \$ 17.85$ , and $\$ 93.25$ were written during July but have not yet been received by the bank.
f. The reconciliation from the previous month, June, showed outstanding checks of $\$ 260.80$ . One of these checks in the amount of $\$ 7.38$ has not yet been received by the bank.
g. After comparing the canceled checks to the bank statement, it was discovered that a check written for the amount of $\$ 18.90$ was deducted as $\$ 19.80$ by the bank.
h. It was discovered that a check written to a creditor in the amount of $\$ 145.60$ was recorded in the books as $\$ 14.56$ . Required:
1.Prepare a bank reconciliation as of July 31.
2.Prepare the necessary general journal entries from the bank reconciliation.

Question 66

In reconciling a bank statement,the bank statement balance is $1,000 and the balance per books is $1,205.A bank service charge is $15; a deposit in transit totals $500,and outstanding checks total $300.The adjusted book balance is

A) $1,490.
B) $1,205.
C) $1,190.
D) $1,505.

Question 67

To complete transactions with the bank,electronic funds transfer (EFT)systems use

A) a computer.
B) checks.
C) currency.
D) drafts or money orders.

Question 68

Post the differences between the cash count and the cash register tape to the Cash Short and Over T account.Assume a change fund of $100.
$$\begin{array} { r r r } \underline{\text { Date } }&\underline{ \text { Cash Register Tape }} &\underline{ \text { Cash Count }} \\ \text { Sept. } 7 & \$ 1,295.89 & \$ 1,402.89 \\8 & 1,678.55 & 1,787.55 \\9 & 941.76 & 1,044.76 \\10 & 1,446.62 & 1,545.62 \\11 & 1,614.13 & 1,714.13\end{array}$$ ?
$\begin{array}{cc}\text {Cash Short and Over }\\\hline\begin{array}{ll|l}& \\\end{array}\end{array}$ 1. What is the amount of cash sales for the week?
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $_________
2. What is the balance in the cash short and over account?
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $_________
3. Does the balance in the cash short and over account represent a shortage or overage? $\quad$ $_________
4. How much cash was deposited? $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $_________

Question 69

Checks deposited by the depositor that are not paid because the drawer did not have sufficient funds are called ____________________.

Question 70

A petty cash fund of $200 has $27 in cash,$170 in petty cash vouchers,and $3 in miscellaneous receipts not included with the petty cash vouchers.The debit to the Cash Short and Over would be

A) $173.
B) $170.
C) $27.
D) $0.

Question 71

The check written to establish the petty cash fund is entered in the journal by

A) debiting Cash and crediting Petty Cash.
B) debiting Petty Cash and crediting Owner's Capital.
C) debiting Owner's Capital and crediting Petty Cash.
D) debiting Petty Cash and crediting Cash.

Question 72

The person presenting the check for payment is called the ____________________.

Question 73

The petty cash payments record indicates classified expenditures as follows: Automobile Expense,$20; Supplies Expense,$12; Postage Expense,$6; and Miscellaneous Expense,$5.The transaction would include

A) debiting Automobile Expense.
B) crediting Supplies Expense.
C) debiting Cash.
D) crediting Accounts Payable.

Question 74

The balance in the checking account of York Company as of July 31 is $5,852.16.The bank statement shows an ending balance of $4,870.00.The following information is discovered by comparing checks deposited and written and noting service charges and other debit and credit memos shown on the bank statement.
$\begin{array} {l r }\text { Deposits in transit:}\\ 7 / 23 & \$ 220.00 \\ 7 / 27 & 615.00 \\\\\text { Outstanding checks: } & \\\text { No. } 530 & \$ 120.00 \\\text { No. } 531 & 36.00 \\\text { No. } 532 & 278.30\\\\\text { Unrecorded ATM withdrawal: }\\7 / 30 & \$ 540.00 \\\\\text { Bank service charge } & \$ 42.00\end{array}$

$\begin{array}{ll}\text { Error on check no. } 954 & \begin{array}{l}\text { Recorded in checkbook as } \$ 83.82 \text {, but was actually written for } \\\$ 83.28 \text {, and cleared the bank correctly. }\end{array}\end{array}$
Required:
Determine the ending balances to reconcile the bank statement and checkbook.

Question 75

On May 1,a petty cash fund was established for $200.The following vouchers were issued during May.
Required:
$\begin{array}{rcllc} \underline{\text { Date}}& \underline{\text { Voucher }}& \underline{\text { Purpose }} & \underline{\text { Amount }}\\\text { May } \quad 1 & 1 & \text { Office supplies } & \$ 3.00 \\3 & 2 & \text { Birthday gift for office worker (misc.) } & 15.00 \\5 & 3 & \text { Mileage reimbursement } & 5.00 \\7 & 4 & \text { Postage due } & 2.00\\8 & 5 & \text { Office supplies } & 4.00 \\11 & 6 & \text { Donation-Goodwill (contribution exp.) } & 10.00 \\15 & 7 & \text { Telephone call (telephone exp.) } & 5.00 \\21 & 8 & \text { Mileage reimbursement } & 11.00 \\23 & 9 & \text { Withdrawal by owner (Carla Sanchez) } & 20.00 \\25 & 10 & \text { Postage due } & 3.50 \\26 & 11 & \text { Office supplies } & 17.00 \\28 & 12 & \text { Copier repair (misc.) } & 18.50\end{array}$
1.Prepare the journal entry to establish the petty cash fund on May 1.
2.Record the vouchers in the petty cash record.Total and rule the petty cash record.
3.Prepare the journal entry to replenish the petty cash fund.Make the appropriate entry in the petty cash record.
$\text { PETTY CASH PAYMENTS FOR THE MONTH OF May, 20-- } \quad \text { Page } 1 >$
$\begin{array}{|c|c|c|c|}\hline \text { Day } & \text { Description } \quad\quad\quad\quad\quad\quad& \text { Voucher No. } & \text { Total Amount } \\\hline & \text { Received in fund... } & & \\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\\\hline\end{array}$

Question 76

Post the differences between the cash count and the cash register tape to the Cash Short and Over T account.Assume a change fund of $100.
$$\begin{array} { r r c c } \underline{\text { Date }} & \underline{\text { Cash Register Tape }} & \underline{\text { Cash Count }} \\\text { March } \quad 3 & \$ 1,495.89 & \$ 1,601.89 \\4 & 1,878.55 & 1,986.55 \\5 & 741.76 & 843.76 \\6 & 1,646.62 & 1,744.62 \\7 & 1,714.13 & 1,814.13\end{array}$$ ?
$\begin{array}{cc}\text {Cash Short and Over }\\\hline\begin{array}{ll|l}& \\\end{array}\end{array}$ 1. What is the amount of cash sales for the week? $\underline{\quad\quad}$
2. What is the balance in the cash short and over account? $\underline{\quad\quad}$
3. Does the balance in the cash short and over account represent a shortage or overage? $\underline{\quad\quad}$
4. How much cash was deposited? $\underline{\quad\quad}$

Question 77

To reconcile the bank statement,which of the following amounts would be added to the bank statement balance?

A) service charge
B) outstanding checks
C) deposits in transit
D) amounts collected by the bank for the depositor's account

Question 78

Check No.450,a payment of $54 for the telephone bill,was incorrectly entered on the check stub as $45.Which of the following adjustments needs to be made?

A) increase the bank statement balance
B) increase the book balance
C) decrease the bank statement balance
D) decrease the book balance

Question 79

Bringing the book and bank balances into agreement is called ____________________.

Question 80

____________________ represent items that the bank deducts from the depositor's account.