Deck 6: Bank Accounts and Cash Funds

Question 1

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.

Answer 1

E

Question 2

A depositor's Cash account is carried on the books of the bank as

A)revenue.
B)an owner's equity account.
C)a contra asset.
D)an asset.
E)a liability.

Answer 2

E

Question 3

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

Answer 3

C

Question 4

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.

Question 5

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 6

The journal entry to record an NSF check would require a

A)debit to Accounts Receivable and a credit to Cash.
B)debit to Cash and a credit to Accounts Receivable.
C)debit to Accounts Payable and a credit to Cash.
D)debit to Miscellaneous Expense and a credit to Cash.
E)debit to Cash and a credit to Accounts Payable.

Question 7

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 8

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.

Question 9

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 10

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 11

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.

Question 12

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 13

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 14

A person authorized to write checks drawn on a checking account at a bank must sign and have on file with the bank a

A)deposit ticket.
B)signature card.
C)bank statement.
D)bank reconciliation.
E)payee card.

Question 15

The three parties to a check are the

A)bank, payee, and the IRS.
B)bank, maker, and payor.
C)signer, depositor, and endorser.
D)drawer, payee, and bank.
E)drawer, payor, and drawee.

Question 16

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 17

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 18

A bank service charge appears on a bank reconciliation as a(n)

A)deduction from the ledger balance.
B)addition to the bank balance.
C)addition to the book balance.
D)deduction from the bank balance.
E)A bank service charge does not appear on a bank reconciliation statement.

Question 19

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 20

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 21

Internal control is the system of policies and procedures that is designed to:

A)protect assets against fraud and waste.
B)provide for accurate accounting data.
C)promote efficient operation.
D)encourage adherence to management policies.
E)all of the answers listed.

Question 22

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 23

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 24

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 25

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 26

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 27

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 28

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 29

The endorsement on the back of a check

A)transfers title to the money.
B)
B)authorizes payment of the check.
C)both a and
D)none of the above.

Question 30

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 31

At the end of the fiscal period, the debit balance in the Change Fund is reported as a(n)

A)revenue on the income statement.
B)asset on the balance sheet.
C)expense on the income statement.
D)liability on the balance sheet.
E)contra asset on the balance sheet.

Question 32

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 33

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 34

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 35

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 36

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 37

At the end of the fiscal period, the credit balance in Cash Short and Over is reported as

A)an other expense on the income statement.
B)an asset on the balance sheet.
C)an other revenue on the income statement.
D)a liability on the balance sheet.
E)part of owner's equity on the balance sheet.

Question 38

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 39

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 40

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 41

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 42

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

Question 43

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

Question 44

Maxine Co. establishes a Petty Cash Fund of $250. The journal entry recorded would include a

A)debit to Cash.
B)debit to Supplies Expense.
C)debit to Petty Cash Fund.
D)none of the answers listed.

Question 45

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 46

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

Question 47

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 48

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 49

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

Question 50

A cash shortage exists when

A)the day's receipts are less than the cash register reading.
B)the day's receipts are more than the cash register reading.
C)the day's receipts are equal to the cash register reading.
D)none of the answers listed.

Question 51

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 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

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

Question 54

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 55

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 56

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 57

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

A)Petty Cash Fund $150Cash $150
B)Cash $150Petty Cash Fund $150
C)Supplies Expense $150Cash $150
D)none of the answers listed.

Question 58

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

Question 59

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

Question 60

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 61

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

Question 62

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

Question 63

Match the terms below with the correct definitions.

Bank form listing all items being deposited

Question 64

If cash amounts to $1,419, excluding the Change Fund, and the cash register tape shows cash sales of $1,425, then Cash Short and Over is credited for $6.

Question 65

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

Question 66

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

Question 67

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

Question 68

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

Question 69

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

Question 70

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

Question 71

If cash amounts to $1,585, excluding the Change Fund, and the cash register tape shows cash sales of $1,570, then Cash Short and Over is credited for $15.

Question 72

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

Question 73

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 74

If the cash register tape reads $220, the Change Fund is $100, and the cash count is $318, there is a $2 overage to Cash.

Question 75

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

Question 76

A bank will accept a check made out to a business without an endorsement.

Question 77

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

Question 78

If the Cash Short and Over account has a debit balance at the end of a month, it indicates a net shortage.

Question 79

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 80

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