Question 1

Deposits that have been recorded on the book, but have not yet been recorded by the bank are:
A) nonsufficient funds deposits.
B) outstanding deposits.
C) deposits in transit.
D) electronic funds deposits.

Accepted Answer

Deposits in transit are deposits that have been recorded on the company's books but have not yet been recorded by the bank. These deposits are typically made near the end of a business day and may not be processed until the following business day. As a result, they are recorded as deposits in transit until the bank has processed them.

Question 2

The bank reconciliation can be used to control cash.

Accepted Answer

Bank reconciliation is a process of comparing the bank statement with the company's own accounting records to identify any discrepancies and reconcile the differences. This helps in ensuring that the cash balance reported by the company is accurate and any errors or fraud are detected in a timely manner, thereby controlling cash.

Question 3

Alpha Company has an account at First Bank. Alpha writes a check payable to Beta Company. In this transaction, Alpha Company is the:
A) payee.
B) payer.
C) drawer.
D) maker.

Accepted Answer

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

Question 4

With online banking, a company still needs to wait until the bank statement is received before they can complete the bank reconciliation.

Accepted Answer

With online banking, companies can usually access their account transactions and balances in real-time or near-real-time, so they don't need to wait for a physical bank statement to arrive before completing the bank reconciliation process.

Question 5

Every adjustment on the bank side of the bank reconciliation needs to be recorded in the books.

Accepted Answer

The answer of Every adjustment on the bank side of...

Question 6

Differences between the amount of cash reported on a company's bank statement and the balance in the company's cash account before the bank reconciliation are primarily due to:
A) errors in the accounting process by the company.
B) errors made by the bank.
C) differences between the cash basis and accrual basis of accounting.
D) the timing difference in recording transactions.

Accepted Answer

The differences between the cash balance in the bank statement and the cash balance in the company's records are typically due to timing differences in recording transactions. For example, checks that were issued but not yet cashed or deposits that were made but not yet reflected in the bank statement. These timing differences affect the reconciling items on the bank reconciliation. While errors in the accounting process or errors made by the bank may contribute to the differences, they are not the primary reason for the discrepancies. Similarly, the differences between cash basis and accrual basis accounting would not affect the reconciling items on the bank reconciliation.

Question 7

All of the following will appear on the bank statement EXCEPT for:
A) Electronic funds transfers (EFT).
B) beginning and ending cash balance.
C) cash receipts and cash payments.
D) deposits in transit.

Accepted Answer

Deposits in transit are transactions that have been recorded by the company but not yet reflected on the bank statement because they have not been processed by the bank at the time the statement is issued.

Question 8

There are three parties to a check. The person or company to whom the check is paid is the:
A) maker.
B) payee.
C) draftee.
D) promissee.

Accepted Answer

The payee is the person or company to whom the check is paid. The maker is the person who writes or creates the check, the draftee is the bank that is ordered to pay the check, and the promissee is the person who promises to pay the check (which is also the maker).

Question 9

The person performing the bank reconciliation should not have any other cash duties.

Accepted Answer

This is to ensure independence and reduce the risk of fraud or errors. Separation of duties is an important internal control measure.

Question 10

Banks require each person authorized to sign on an account to provide a(n) ________ which protects against forgery.
A) confirmation card
B) signature card
C) authorization form
D) online transfer form

Accepted Answer

Banks require a signature card from each person authorized to sign on an account, which includes their signature, to protect against forgery. Option A (confirmation card) and option C (authorization form) may be used in banking contexts, but they do not specifically refer to the document required for signature verification. Option D (online transfer form) is not relevant to this question.

Question 11

When preparing a bank reconciliation, which of the following items should be added to the book balance?
A) EFT receipts
B) Deposits in transit
C) Collection items
D) Both EFT receipts and collection items

Accepted Answer

EFT receipts and collection items 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 12

Which of the following items can be added or subtracted from the bank balance when preparing the bank reconciliation?
A) Service charges
B) Bank errors
C) Deposits in transit
D) Outstanding checks

Accepted Answer

The answer of Which of the following items can be...

Question 13

The person to whom a check is paid is referred to as the drawee.

Accepted Answer

The person to whom the check is paid is referred to as the payee. The drawee is the bank on which the check is drawn.

Question 14

Sharon is the receptionist and office manager for The Best Construction Company. Sharon handles all of the office duties including billing, cash receipts, payroll, depositing checks and preparing the monthly bank reconciliation. She also prepares all of the checks for disbursements and is an authorized signer on all checks under $25,000. For checks above this amount, two signatures are required. She has been a trusted employee of The Best Construction Company for many years, but still makes just a small amount above minimum wage. She is even the godmother to two of the owner's children and often watches them while their parents go on exotic vacations. Sharon is such a good employee that she rarely takes vacations. Since the owner trusts her completely, he concentrates on the construction business and leaves all of the office work to Sharon. He would never interfere with her work since he has very little accounting knowledge. Sharon has recently become a grandmother and enjoys buying her grandchildren expensive toys and clothes. She has just bought a new Hummer for herself and an exclusive condo in the Virgin Islands.
What are the five basic control procedures for any class of transactions? Using these five basic control procedures, what can be done to strengthen the internal control procedures for The Best Construction Company?

Accepted Answer

The answer of Sharon is the receptionist and office manager...

Question 15

There are two records of a business's cash-the cash account in the company's general ledger and the bank statement.

Accepted Answer

There are two records of a business's cash - the cash account in the company's general ledger and the bank statement.

Question 16

Differences between the bank statement and the company's Cash account are primarily the result of a time lag in recording transactions.

Accepted Answer

The bank statement may have transactions that have not yet been recorded in the company's Cash account or vice versa, leading to differences between the two. This is often due to a time delay in processing transactions.

Question 17

When preparing a bank reconciliation:
A) deposits in transit are added to the bank balance.
B) service charges are subtracted from the bank balance.
C) outstanding checks are deducted from the book balance.
D) book errors are subtracted from the bank balance.

Accepted Answer

The answer of When preparing a bank reconciliation:
A) deposits in...

Question 18

Outstanding checks are checks that have been recorded by the bank, but are not yet recorded on the books.

Accepted Answer

Outstanding checks are checks that have been recorded on the books, but not yet cleared by the bank.

Question 19

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 a(n) ________ and is called a(n) ________.
A) addition to the bank balance; outstanding deposit
B) addition to the bank balance; deposit in transit
C) deduction to the bank balance; deposit in transit
D) deduction to the bank balance; outstanding deposit

Accepted Answer

The deposit that was made by Herbert Company but not yet recorded by the bank is called a deposit in transit. It should be added to the bank balance on the bank reconciliation. Therefore, the best choice is B, which states that the deposit should be added to the bank balance and it is a deposit in transit.

Question 20

In a bank reconciliation, a NSF check is:
A) added to the bank balance.
B) added to the book balance.
C) deducted from the book balance.
D) deducted from the bank balance.

Accepted Answer

The answer of In a bank reconciliation, a NSF check...

Quiz 4: Internal Control Cash

Deposits that have been recorded on the book, but have not yet been recorded by the bank are:

The bank reconciliation can be used to control cash.

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

With online banking, a company still needs to wait until the bank statement is received before they can complete the bank reconciliation.

Every adjustment on the bank side of the bank reconciliation needs to be recorded in the books.

Differences between the amount of cash reported on a company's bank statement and the balance in the company's cash account before the bank reconciliation are primarily due to:

All of the following will appear on the bank statement EXCEPT for:

There are three parties to a check. The person or company to whom the check is paid is the:

The person performing the bank reconciliation should not have any other cash duties.

Banks require each person authorized to sign on an account to provide a(n) ________ which protects against forgery.

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

Which of the following items can be added or subtracted from the bank balance when preparing the bank reconciliation?

The person to whom a check is paid is referred to as the drawee.

There are two records of a business's cash-the cash account in the company's general ledger and the bank statement.

Differences between the bank statement and the company's Cash account are primarily the result of a time lag in recording transactions.

When preparing a bank reconciliation:

Outstanding checks are checks that have been recorded by the bank, but are not yet recorded on the books.

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 a(n) and is called a(n) .

In a bank reconciliation, a NSF check is: