Deck 6: Bank Accounts, Cash Funds, and Internal Controls

Question 1

B. Hallonon shows a balance in her Cash account of $360, but the bank statement just received shows a balance of $460. The difference of $100 may be caused by

A) an NSF check for $100.
B) an outstanding check for $100.
C) a debit memo for $100.
D) a deposit in transit of $100.
E) interest income of $50.

Answer 1

B

Question 2

The amount of cash appearing on the November 30 balance sheet is the amount

A) reported on the November 30 bank statement.
B) shown as the adjusted balance on the bank reconciliation statement.
C) of cash added to the book balance on the bank reconciliation.
D) of cash deducted from the book balance on the book reconciliation.
E) reported on the October 31 bank statement.

Answer 2

B

Question 3

In a bank reconciliation, a $400 NSF check is

A) deducted from the ledger balance.
B) added to the ledger balance.
C) deducted from the bank balance.
D) added to the bank balance.
E) ignored.

Answer 3

A

Question 4

An NSF check held by the payee should be carried on the payee's records as

A) Cash Short and Over.
B) an account receivable.
C) an account payable.
D) part of cash on hand.
E) a note receivable.

Question 5

The bank statement will show

A) the beginning bank balance.
B) the balance on deposit at the end of the month.
C) any deductions from the bank statement balance.
D) the amounts of checks paid during the month.
E) all of these.

Question 6

Which of the following gives a bank a copy of the official signatures of any persons authorized to sign checks?

A) A loan statement
B) A signature card
C) A visiting card
D) A memo statement
E) A payee card

Question 7

Which of the following is deducted from the ledger balance of cash in a bank reconciliation statement?

A) A bank service charge
B) A deposit in transit
C) A bank note redeemed
D) A check collected
E) A bank credit memo

Question 8

From a bank's viewpoint, a customer's account in the bank is considered a:

A) revenue.
B) surplus.
C) contra asset.
D) donation.
E) liability.

Question 9

All of the following are items that cause a difference between the bank balance and the book balance except

A) NSF checks.
B) deposits in transit.
C) outstanding checks.
D) canceled checks.
E) bank service charges.

Question 10

Which of the following would be added to the bank statement balance of cash?

A) Note collected by bank
B) Service charges
C) Deposits in transit
D) Outstanding checks
E) NSF checks

Question 11

On a bank statement, a deposit of $402 was recorded as $204. The difference of $198 should be treated as a(n)

A) deduction from the ledger balance of cash.
B) addition to the bank statement balance.
C) deduction from the bank statement balance.
D) addition to the ledger balance of cash.
E) addition to the Sales account.

Question 12

Accompanying the bank statement is a debit memorandum for an NSF check for $120. This item would be included on the bank reconciliation as a(n)

A) addition to the bank statement balance.
B) deduction from the bank statement balance.
C) addition to the ledger balance of cash.
D) deduction from the ledger balance of cash.
E) addition to a revenue account.

Question 13

Which data are generally not included on a check?

A) Date of the check
B) Signature of the party writing the check
C) Address of the payee
D) Amount the bank is to pay the payee
E) Name of the bank on which the check was drawn

Question 14

The parties to a check are:

A) a bank, a payee, and the Internal Revenue Service (IRS).
B) a checker, a maker, and a issuer.
C) the Federal Bank, a depositor, and a cashier.
D) a drawer, a payee, and a bank.
E) a drawer, a payer, and a drawee.

Question 15

A check issued to a creditor in the amount of $35 was recorded in the journal as $350. In the bank reconciliation, the correction would be recorded as a(n)

A) deduction from the bank statement balance.
B) addition to the bank statement balance.
C) deduction from the ledger balance of cash.
D) addition to the ledger balance of cash.
E) addition to a revenue account.

Question 16

Which of the following is the journal entry to record a NSF (non-sufficient funds) check received from a customer?

A) Debit to Accounts Receivable and a credit to Cash
B) Debit to Sales Expense and a credit to Accounts Payable
C) Debit to Bad Debts and a credit to Other Income
D) Debit to Payments and a credit to Cash
E) Debit to Cash and a credit to Accounts Payable

Question 17

A check written for $68.30 in payment of an account was recorded on the books as $86.30. On a bank reconciliation, this will appear as a(n)

A) addition to the bank balance for $18.
B) deduction from the bank balance for $18.
C) addition to the ledger balance for $18.
D) deduction from the ledger balance for $18.
E) addition to the bank balance of $36.

Question 18

Manx Company's bank statement shows that a note receivable of $15,000 and interest of $1,050 were collected by the bank on behalf of the depositor. The entry required on the company's books is

A) debit Cash; credit Notes Receivable.
B) debit Cash; debit Interest Expense; credit Notes Receivable.
C) debit Cash; debit Interest Income; credit Notes Receivable.
D) debit Cash; credit Interest Income; credit Notes Receivable.
E) debit Notes Receivable; credit Cash; credit Interest Income.

Question 19

After preparing the bank reconciliation, journal entries must be prepared for

A) any errors made on the books revealed by the bank reconciliation.
B) any errors made by the bank revealed by the bank reconciliation.
C) all items on the bank's side.
D) only outstanding checks.
E) only deposits in transit.

Question 20

The ledger balance of cash may differ from the bank statement balance because of

A) NSF checks.
B) outstanding checks.
C) service charges.
D) deposits in transit.
E) all of these.

Question 21

Which of the following would be subtracted from the bank statement balance when preparing a bank reconciliation?

A) deposit in transits.
B) outstanding checks.
C) notes collected by the bank.
D) bank service charges.

Question 22

A Petty Cash Fund established for a $250 balance had petty cash receipts totaling $219 and cash in the amount of $31. The entry to replenish the fund would include a

A) credit to Petty Cash Fund for $219.
B) credit to Cash for $250.
C) debit to Petty Cash Fund for $219.
D) debit to the various accounts money was spent on for $219.
E) debit to Petty Cash Fund for $250.

Question 23

The bank reconciliation for Stuart Co. shows a $1,000 note collected by the bank from customer, A. Randall. The journal entry to record this item would involve a

A) debit to cash.
B) credit to Accounts Receivable.
C) debit to Notes Receivable.
D) none of the answers listed.

Question 24

The system of policies and procedures that a company sets to protect its assets are known as:

A) a lockbox system.
B) critical control system.
C) a reconciliation system.
D) a standard system.
E) internal control system.

Question 25

Which of the following would be added to the bank statement balance when preparing a bank reconciliation?

A) deposit in transits.
B) outstanding checks.
C) notes collected by the bank.
D) bank service charges.

Question 26

The amount of the Petty Cash Fund should be included on the bank reconciliation as

A) an addition to the book balance of cash.
B) an addition to the bank statement balance.
C) a deduction from the bank statement balance.
D) a part of a late deposit.
E) The Petty Cash Fund is not included on the bank reconciliation.

Question 27

Which of the following would require a journal entry after the bank reconciliation has been prepared?

A) deposit in transits.
B) outstanding checks.
C) notes collected by the bank.
D) none of the answers listed.

Question 28

At the end of the day, $443 in cash is in the register, and the amount of the Change Fund is $100. If the cash register tape indicates $345, which of the following journal entries should be made?

A) Debit Cash, $345; credit Sales, $345
B) Debit Cash, $443; credit Sales, $443
C) Debit Cash, $443; credit Cash Short and Over, $98; credit Sales, $345
D) Debit Cash, $343; debit Change Fund, $100; credit Sales, $443
E) Debit Cash, $343; debit Cash Short and Over $2; credit Sales $345

Question 29

Which of the following would be subtracted from the ledger balance of cash when preparing a bank reconciliation?

A) deposit in transits.
B) outstanding checks.
C) notes collected by the bank.
D) bank service charges.

Question 30

At the end of fiscal year, if the cash short and over account has a credit balance, the amount is reported on the:

A) income statement under Bad Debts.
B) balance sheet under Owner's Equity.
C) income statement under Miscellaneous Income.
D) balance sheet under Current Liabilities.
E) income statement under Non-Operating Expenses.

Question 31

The entry to reimburse the Petty Cash Fund includes a

A) credit to Petty Cash Fund.
B) debit to Cash.
C) credit to Accounts Payable.
D) debit to Petty Cash Fund.
E) debit to various accounts upon which the money was spent.

Question 32

Which of the following represent good internal control procedures concerning cash receipts?

A) Cash should be deposited only at the end of the month.
B) Cash receipts should be posted to the Accounts Receivable account at the end of the month.
C) Designate a specific employee to open mail, handle cash, and record the cash.
D) Endorse checks immediately upon receipt with the stamp, "For Deposit Only".

Question 33

Two bank statement amounts that require journal entries are

A) collection of a note receivable and deposits in transit.
B) bank service charges and an NSF check.
C) outstanding checks and an error in recording a check.
D) deposits in transit and bank service charges.
E) deposits in transit and outstanding checks.

Question 34

Which of the following would be added to the ledger balance of cash when preparing a bank reconciliation?

A) deposit in transits.
B) outstanding checks.
C) notes collected by the bank.
D) bank service charges.

Question 35

Which of the following represents good internal control procedures concerning cash payments?

A) Allow anyone to access petty cash.
B) Make sure that all cash payments are made by check (with the exception of petty cash).
C) Assign an employee responsibility of preparing the checks, signing the checks, and preparing the bank reconciliation.
D) Keep check supplies available to all employees.

Question 36

Which of the following statements is true about a debit balance in a Change Fund?

A) It is classified as a revenue account and is recorded on the income statement.
B) It is classified as an asset and is recorded on the balance sheet.
C) It is classified as a miscellaneous expense and is recorded on the income statement.
D) It is classified as a liability and is recorded on the balance sheet.
E) It is classified as owner's equity and is recorded on the balance sheet.

Question 37

A Petty Cash Fund established with a $300 balance had petty cash receipts totaling $269 and cash in the amount of $31. The entry to replenish the fund would include a

A) credit to Cash for $269.
B) debit to Petty Cash Fund for $269.
C) debit to various expenses for $31.
D) credit to Petty Cash Fund for $269.
E) credit to various expenses for $269.

Question 38

If the Petty Cash Fund is not replenished on the balance sheet date,

A) income will be understated.
B) both assets and liabilities will be understated.
C) assets will be understated.
D) liabilities will be overstated.
E) both assets and income will be overstated.

Question 39

When a Petty Cash Fund has been established, which of the following relationships should be true at all times?

A) Petty Cash Fund = Cash in the petty cash box − Petty cash vouchers
B) Petty Cash Fund = Petty cash vouchers
C) Petty Cash Fund = Cash in the petty cash box + Petty cash vouchers
D) Petty Cash Fund = Cash in the petty cash box
E) Petty Cash Fund = Cash in the petty cash box − $100

Question 40

Which of the following is required by a bank to authorize the payment of a check made out to a business?

A) The transfer of the check
B) The issue of the check
C) The acceptance of the check
D) The endorsement of the check

Question 41

At the end of the fiscal period, the Cash Short and Over account has a credit balance. This amount would be

A) included as part of Miscellaneous Income on the Income Statement.
B) included as part of Miscellaneous Expense on the Income Statement.
C) shown as a separate account on the Balance Sheet.
D) none of the answers listed.

Question 42

The bank reconciliation for Lahiri Co. shows a $30 debit memo for service charges. The journal entry to record this item would involve a

A) debit to Cash.
B) debit to Debit Memo.
C) debit to Miscellaneous Expense.
D) none of the answers listed.

Question 43

A __________________ should be used to account for every payment from the fund.

A) petty cash fund
B) petty cash voucher
C) petty cash signature card
D) none of the answers listed

Question 44

Raton Services cash count at the end of the day totals $3,120 and the cash register tape shows $3,025. The amount of the change fund is $100. Raton Services would record the revenue for the day as follows

A)
$\text { Cash } \quad \$ 3,120$
$\text { Income from Services } \quad \$ 3,120$
B)
$\begin{array} { l c } \text { Cash } & \$ 3,120 \\\text { Cash Short and Over } & \$ 5 \\\text { Income from Services } & \$ 3,125\end{array}$
C)
$\begin{array} { l l } \text { Cash } & \$ 3,025 \\\text { Income from Services } & \$ 3,025\end{array}$
D)
$\begin{array} { l c } \text { Cash } & \$ 3,020 \\\text { Cash Short and Over } & \$ 5 \\\text { Income from Services } & \$ 3,025\end{array}$

Question 45

Broomfield Services cash count at the end of the day totals $1,230 and the cash register tape shows $1,120. The amount of the change fund is $100. What is the amount of the cash shortage or overage?

A) $110 cash overage
B) $10 cash shortage
C) $210 cash shortage
D) none of the answers listed.

Question 46

Frank Delivery Services establishes a Change Fund of $100. At the end of the day, Frank Delivery Services had $1,230 on hand. The journal entry to record the day's receipts would include a

A) debit to Change Fund.
B) credit to Income from Services.
C) debit to Petty Cash Fund.
D) none of the answers listed.

Question 47

Henry Co. establishes a Petty Cash Fund of $150. The journal entry to establish the fund would be:

A)
Petty Cash Fund $\quad\$ 150$
Cash $\quad\$ 150$
B)
$\begin{array} { l l } \text { Cash } & \$ 150 \\\text { Petty Cash Fund } & \$ 150\end{array}$
C)
Supplies Expense $\quad\$ 150$
Cash $\quad\$ 150$
D) none of the answers listed.

Question 48

Which of the following statements is correct concerning a Petty Cash Fund?

A) When reimbursing the Petty Cash Fund, the Petty Cash Fund account would be debited.
B) If no change is made in the size of the fund, the Petty Cash Fund account is debited only when the fund is first established.
C) If the Petty Cash Fund amount is decreased, the Petty Cash Fund account would be debited.
D) The Petty Cash Fund is not listed on the financial statements.

Question 49

A __________________ is a record indicating the amount of each petty cash voucher, the accounts to which it should be charged, and the purpose of the expenditure.

A) petty cash fund
B) signature card
C) petty cash payments record
D) none of the answers listed

Question 50

Grand Co. cash count at the end of the day totals $1,580 and the cash register tape shows $1,415. The amount of the change fund is $150. Grand Co. would record the revenue for the day as follows

A)
$\begin{array} { l l } \text { Cash } & \$ 1,580 \\\text { Income from Services } & \$ 1,580\end{array}$
B)
$\begin{array} { l c } \text { Cash } & \$ 1,430 \\\text { Cash Short and Over } & \$ 15 \\\text { Income from Services } & { \$ 1,415 }\end{array}$
C)
$\text { Cash } \quad \$ 1,415$
$\text { Income from Services } \quad \$ 1,415$
D)
Cash $\quad \$ 1,600$
Cash Short and Over $\quad\$ 15$
Income from Services $\quad\$ 1,585$

Question 51

When reimbursing the Petty Cash Fund, the journal entry would involve a

A) debit to Petty Cash Fund.
B) credit to Petty Cash Fund.
C) debit to Cash.
D) credit to Cash.

Question 52

Pueblo Co. establishes a Change Fund of $100. The journal entry recorded would include a

A) debit to Change Fund.
B) credit to Income from Services.
C) debit to Cash.
D) none of the answers listed.

Question 53

San Jose Co. establishes a Change Fund of $200. At the end of the day, San Jose Co. has $2,350 on hand. The journal entry to record the day's receipts would be

A)
$\text { Cash } \quad \$ 2,350$
Income from Services $\quad\$ 2,350$
B)
$\text { Change Fund } \quad \$ 2,150$
$\text { Cash } \quad \$ 2,150$
C)
$\text { Cash } \quad \$ 2,150$
$\text { Income from Services } \quad \$ 2,150$
D)
$\begin{array} { l l } \text { Change Fund } & \$ 2,350 \\\text { Income from Services } & \$ 2,350\end{array}$

Question 54

Which of the following causes a cash shortage?

A) A day's receipts are less than the cash register reading.
B) A day's receipts are more than the cash register reading.
C) A day's total sales is equal to the cash register reading.
D) A day's total sales is more than the cash register reading.

Question 55

Aquamarine Co. establishes a Change Fund of $450. Which of the following journal entries records this transaction?

A)
Accounts Payable $\quad\$ 450$
Other Income $\quad \$ 450$
B)
Change Fund $\quad \$ 450$
Cash $\quad \$ 450$
C)
$\text { Petty Cash Fund } \$ 450$
$\text { Cash } \quad \$ 450$
D)
Change Fund $\quad \$ 450$
Petty Cash Fund $\quad \$ 450$

Question 56

The __________________ is used by a business to make change for customers who pay cash for goods or services.

A) petty cash fund
B) cash fund
C) change fund
D) none of the answers listed

Question 57

Arthur Co. establishes a Petty Cash Fund of $500. The journal entry recorded includes a:

A) debit to Accounts Receivables.
B) credit to Administrative Expense.
C) debit to Petty Cash Fund.
D) credit to Capital.

Question 58

The person to whom a check is drawn is referred to as the payee.

Question 59

The bank reconciliation for Jhumpa Co. shows a $100 personal withdrawal by L. Jhumpa, the owner, using an ATM, that was not recorded. The journal entry to record this item would involve a

A) debit to Wages Expense.
B) debit to L. Jhumpa, Drawing.
C) debit to Cash.
D) none of the answers listed.

Question 60

Kohen Co. establishes a Petty Cash Fund of $100. During the month, Kohen Co. made the following payments from its Petty Cash Fund: Bought pencils and pens, $15.00
Paid postage on packages, $12.00
S. Kohen, the owner, withdrew $45.00 for personal use.
The journal entry to reimburse the fund would be:

A)
$\begin{array} { l c } \text { Petty Cash Fund } & \$ 72 \\\text { Cash } & \$ 72\end{array}$
B)
$\begin{array} { l l } \text { Cash } & \$ 28 \\\text { Petty Cash Fund } & \$ 28\end{array}$
C)
$\begin{array} { l c } \text { Supplies } & \$ 15 \\\text { Miscellaneous Expense } & \$ 12 \\\text { S. Kohen, Drawing } & \$ 45 \\\text { Cash } & \$ 72\end{array}$
D)
$\begin{array} { l r } \text { Supplies } & \$ 15 \\\text { Miscellaneous Expense } & \$ 12 \\\text { S. Kohen, Drawing } & \$ 45 \\\text { Petty Cash Fund } & \$ 72\end{array}$

Question 61

Entries are made to the Petty Cash Fund account only when the fund is first established, when it is changed in size, or when it is abolished.

Question 62

After a bank reconciliation has been completed, the accountant must make journal entries to record the outstanding checks.

Question 63

A business should make all payments by check, including payment from the Petty Cash Fund.

Question 64

A check recorded on a deposit slip should be listed by its ABA number and its dollar amount.

Question 65

When a Petty Cash Fund is established, Cash is debited and Petty Cash Fund is credited.

Question 66

A check that is outstanding for two consecutive months should be included on the bank reconciliation for the first month only.

Question 67

A special fund maintained to pay relatively small amounts for expenses, assets, or withdrawals is called a Petty Cash Fund.

Question 68

A deposit in transit has been recorded by the company but not by the bank.

Question 69

Petty cash payments do not need to be recorded separately in the general journal.

Question 70

The information needed to record journal entries based on the bank reconciliation is found in the section of the bank reconciliation that begins with the ledger balance of cash.

Question 71

The Petty Cash Fund balance of cash is the same as the balance in the general ledger Cash account.

Question 72

In preparing a bank reconciliation, a deposit in transit is added to the ledger balance of cash.

Question 73

On a bank statement, an NSF check is usually listed as a debit memorandum.

Question 74

An entry is made to the Change Fund account each time a deposit is made.

Question 75

The amount on the cash register tape indicates the revenue earned, and the cash count will always agree with it.

Question 76

A journal entry debiting Cash and crediting Accounts Receivable is required for an NSF check.

Question 77

On a bank reconciliation, a debit memorandum indicating the bank service charge is subtracted from the ledger balance of cash.

Question 78

When a Petty Cash Fund is reimbursed, the Petty Cash Fund account is credited for the amount paid out of the fund.

Question 79

A bank statement balance of cash should always match the ledger balance of cash.

Question 80

An NSF check is a check issued by the writer for which there are not sufficient funds in the bank.