Question 1

When preparing a bank reconciliation, which of the following items should be added to the book balance?

Accepted Answer

Collection items and EFT receipts are both items that have been recorded in the company's books but have not yet cleared the bank. Therefore, they need to be added to the book balance when preparing a bank reconciliation.

Question 2

The checks that have been paid by the bank on behalf of the depositor, which are included with the bank statement, are called:

Accepted Answer

Canceled checks are those that have been paid by the bank and returned to the depositor with the bank statement.

Question 3

Herbert Company deposited $25,000 in its bank on the same day as-but after-the bank prepared Herbert Company's bank statement. The deposit should appear on the bank reconciliation as an) and is called an).

Accepted Answer

The deposit is not yet reflected in the bank statement, so it is added to the bank balance as a deposit in transit.

Question 4

When opening incoming mail, the mailroom employee should compare the amount of the check received with the amount shown on the:

Accepted Answer

The remittance advice is a document sent by the customer to the supplier, detailing the payment amount and what the payment is for, making it the appropriate document to compare with the check received.

Question 5

Which of the following expresses the order by which documents are prepared in the purchasing process?

Accepted Answer

The correct order is: purchase request (initiating the need for goods/services), purchase order (formalizing the request), receiving report (confirming receipt of goods/services), and payment packet (compiling documents for payment).

Question 6

Many businesses have their customers pay directly to a special post office box. This system is known as an):

Accepted Answer

The lock-box system is a service provided by banks to process payments received by a company, where customers send their payments to a special post office box.

Question 7

A bank reconciliation included an outstanding check of $1,300 for the purchase of supplies. The journal entry to record this reconciling item:

Accepted Answer

Outstanding checks are already recorded in the company's books, so no additional journal entry is needed for the bank reconciliation.

Question 8

A recent cash budget showed estimated cash receipts of $159,000, estimated cash disbursements of $155,000, and a desired ending cash balance of $6,000, with no borrowing of funds. The beginning cash balance was:

Accepted Answer

The answer of A recent cash budget showed estimated cash...

Question 9

The bank statement balance is $6,450 and shows a service charge of $30, interest earned of $25, and an NSF check for $475. Deposits in transit total $1,850; outstanding checks are $1,125. What is the adjusted book balance?

Accepted Answer

The answer of The bank statement balance is $6,450 and...

Question 10

Requiring employees to take annual vacations is a part of which characteristic of internal control?

Accepted Answer

The answer of Requiring employees to take annual vacations is...

Question 11

An imprest petty cash fund of $400 was established for minor disbursements. At the end of the month, the fund included petty cash tickets for the purchase of $185 in supplies, $41 for postage, $86 for fuel and a delivery charge of $65. How much cash is required to replenish the fund?

Accepted Answer

The answer of An imprest petty cash fund of $400...

Question 12

The effect of the entry to establish the petty cash fund is to:

Accepted Answer

Establishing a petty cash fund involves transferring a certain amount of cash from the main cash account to the petty cash account, thus decreasing Cash and increasing Petty Cash. Total assets remain unchanged.

Question 13

Alpha Company has an account at First Bank. Alpha writes a check payable to Beta Company. In this transaction, Alpha Company is the:

Accepted Answer

The answer of Alpha Company has an account at First...

Question 14

If a bookkeeper mistakenly recorded a disbursement as $36 instead of the correct amount of $63, the error should be shown on the bank reconciliation as a:

Accepted Answer

The error is a $27 understatement in the books ($63 - $36), so $27 should be deducted from the books to correct it.

Question 15

A bank statement included a NSF check from Kim Fields for $2,100. The journal entry to record this reconciling item should:

Accepted Answer

The NSF check means the check was not honored due to insufficient funds. The correct entry is to debit Accounts Receivable to reflect the amount still owed by Kim Fields and credit Cash to reduce the cash balance.

Question 16

In a bank reconciliation, items recorded by the company, but not yet been recorded by the bank, include:

Accepted Answer

Outstanding checks are payments made by the company that have not yet been processed or recorded by the bank.

Question 17

Bill Bosworth files a tax return overstating a client's expenses, and the client receives the appropriate refund from the IRS. What kind of ethics is involved?

Accepted Answer

Falsifying IRS documents, being greedy, and colluding with the client to defraud the government are all ethical violations involved in this scenario.

Question 18

There are two records of a business's cash-the:

Accepted Answer

The two primary records of a business's cash are the bank statement, which shows the transactions and balance as per the bank, and the cash account in the general ledger, which records all cash transactions and balances as per the business's books.

Question 19

A bank deposit of $450 recorded by the bank as $500 should appear on a bank reconciliation as an):

Accepted Answer

The bank recorded the deposit as $500 instead of $450, so the bank balance is overstated by $50. Therefore, it should be deducted from the bank balance to reconcile the discrepancy.

Question 20

If a bank statement included an EFT payment of $945 for insurance, the journal entry to record this reconciling item should include a:

Accepted Answer

The EFT payment for insurance reduces the cash balance, so the correct entry is to credit Cash for $945.

Quiz 4: Internal Control and Cash