Accounting 201 - Chapter 4 Review Test Quiz

Outstanding checks are items recorded by the company but have not yet been recorded by the bank. This means that the company has issued checks that have not yet been cashed or processed by the bank. These checks are still considered as part of the company's outstanding liabilities until they are cleared by the bank. Therefore, outstanding checks need to be included in a bank reconciliation to ensure that the company's records match the bank's records.

A fund with a small amount of cash on hand for minor disbursements is called a petty cash fund. This fund is typically used for small expenses such as office supplies, postage, or employee reimbursements. It allows for convenient and immediate payments without the need for formal approval or processing through regular accounts payable procedures. The petty cash fund is managed by a designated custodian who is responsible for maintaining the fund, recording transactions, and replenishing the cash as needed.

When the bank statement was prepared, the $25,000 deposit made by Herbert Company had not yet been recorded by the bank. Therefore, it should be added to the bank balance in the bank reconciliation. This type of deposit is called a "deposit in transit" because it is in the process of being recorded by the bank.

Checks written by a company that have not been paid by the bank yet are considered as deductions from the bank balance because they have not been subtracted from the company's account. These checks are referred to as outstanding checks because they are still in transit and have not been cleared by the bank.

A NSF check refers to a check that has been returned by the bank due to insufficient funds in the account of the issuer. When reconciling the bank statement with the company's books, this NSF check should be deducted from the book balance. This is because the company had initially recorded the check as a deposit or credit in its books, but since the check bounced, it is no longer considered as a valid transaction. Therefore, deducting the NSF check from the book balance helps to reconcile the actual balance with the bank's balance.

When the bank pays interest to a company's account, it increases the balance in the company's bank account. This interest income should be recorded in the company's books and added to the book balance. Therefore, the correct answer is "added to the book balance." This transaction has no impact on the bank balance, as it is already reflected in the bank statement.

The book side of a bank reconciliation includes NSF checks, bank collections, and interest earned on the checking account. This means that when reconciling the bank statement with the company's records, these items need to be taken into account. NSF checks are checks that were returned by the bank due to insufficient funds, bank collections are funds that the bank has collected on behalf of the company, and interest earned on the checking account is the interest that the company has earned on its account balance.

When the bank collects $200 on behalf of its customer, it means that the bank has received $200 from someone and has added it to the customer's account. This amount should be reflected in the customer's book balance, as it is an increase in their funds. Therefore, the $200 should be added to the book balance on the bank reconciliation.

When performing a bank reconciliation, an EFT cash receipt is added to the book balance. This is because the EFT cash receipt represents funds that have been received by the company but have not yet been recorded in the bank statement. By adding the EFT cash receipt to the book balance, the company ensures that the book balance reflects the correct amount of funds that it has received.

When a bank statement shows a NSF (non-sufficient funds) check, it means that the check was returned unpaid due to insufficient funds in the account. In a bank reconciliation, this would be shown as a deduction from the book balance because the company's records had initially included the amount of the check as a receivable, but now it cannot be considered as such since it was not actually received. Therefore, the book balance needs to be adjusted by deducting the amount of the NSF check to reflect the actual amount of funds available.

When preparing a bank reconciliation, outstanding checks should be subtracted from the bank balance. Outstanding checks are checks that have been written by the company but have not yet been cleared by the bank. Therefore, they have not yet been deducted from the bank balance. By subtracting outstanding checks from the bank balance, the company can reconcile its own records with the bank's records and ensure that the two balances match.

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In a bank reconciliation, items recorded by the bank but not yet recorded by the company refer to transactions that the bank has processed but the company has not yet accounted for. This can include bank collections, which are funds received by the bank on behalf of the company but have not been recorded in the company's books. Therefore, the correct answer is bank collections.

When a bank statement includes a bank collection and related interest revenue, the correct journal entry to record this reconciling item should include a debit to Cash. This is because a bank collection represents an increase in the cash balance of the company. By debiting Cash, we are recording the increase in the cash balance to reflect the collection.

The correct answer is the timing difference in recording transactions. This means that the cash reported on the bank statement may not match the balance in the company's Cash account because there could be a delay in recording certain transactions. For example, a company may have deposited cash into its bank account at the end of the month, but the bank statement may not reflect this deposit until the beginning of the next month. Similarly, checks written by the company may not be processed by the bank immediately, leading to a difference in the reported cash balances.

If the bank records a deposit of $1,500 as $150, the error should be shown on a bank reconciliation as an addition to the bank balance of $1,350. This is because the bank has incorrectly recorded a lower amount for the deposit, so the true amount of $1,350 needs to be added to the bank balance to correct the error.

In a bank reconciliation, an EFT cash payment is deducted from the book balance. This is because an EFT cash payment represents a payment made electronically from the bank account, which has not yet been recorded in the company's books. Therefore, to reconcile the bank statement with the company's books, the EFT cash payment needs to be deducted from the book balance to account for the payment that has already been made.

The person who prepares the bank reconciliation should have no other cash duties because it is important to maintain separation of duties in order to prevent fraud or errors. By having one person solely responsible for bank reconciliation, it reduces the risk of any mishandling or misappropriation of cash. This ensures that the process is carried out accurately and independently, providing a reliable and trustworthy record of the company's cash transactions.

From the given options, the correct answer is "All items listed on the book side." This means that any discrepancies or differences found between the bank statement and the company's books need to be recorded in the journal. These could include outstanding checks, deposits in transit, bank errors, or any other items that affect the balance in the company's books. By journalizing these items, the company ensures that its records are accurate and up to date.

The correct answer is to debit Accounts Receivable and credit Cash for $2,100. This is because the NSF check indicates that the customer's payment bounced, meaning that the amount owed by the customer should be reversed from the Accounts Receivable account. At the same time, Cash should be reduced by the same amount since the payment was not received.

Canceled checks refer to the checks that have been paid by the bank on behalf of the depositor and are included with the bank statement. These checks have already been processed and cleared by the bank, indicating that the funds have been deducted from the depositor's account and transferred to the payee.

The error should be shown as a $630 addition to the books because the bookkeeper mistakenly recorded the disbursement as $810 instead of $180. This means that $630 ($810 - $180) was incorrectly added to the books.

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The correct entry to establish the change fund is to debit the Change Fund account and credit the Cash account. This means that the Change Fund account will increase, representing the amount of money set aside for the change fund, while the Cash account will decrease as the money is taken out to establish the fund.

When preparing a bank reconciliation, both EFT receipts and collection items should be added to the book balance. EFT receipts are electronic funds transfers received by the company but not yet recorded in the books. Adding them to the book balance ensures that the company's records reflect the actual funds received. Collection items refer to checks or other forms of payment received by the bank on behalf of the company. These items may not have been deposited yet, so adding them to the book balance ensures that the company's records reflect the funds that will soon be available.

The bank charge of $40 for imprinting checks would be considered a deduction from the book balance on the bank reconciliation. This is because the bank charge reduces the amount of money available in the account, resulting in a lower book balance.

The correct answer is a credit to Cash for $945. This is because an EFT payment means that money is being transferred out of the bank account, resulting in a decrease in cash. Therefore, the journal entry should show a credit to Cash.

Bank collections will cause a difference between the book balance and the bank balance. When the bank collects payments on behalf of the company, the amount collected may not be immediately reflected in the company's books. This can result in a higher bank balance than the book balance until the company records the collection in their books.

The correct answer is the bank statement and the cash account in the general ledger. The bank statement provides a record of all the transactions made by the business through the bank, including deposits, withdrawals, and any fees or charges. The cash account in the general ledger, on the other hand, tracks all the cash transactions made by the business, including cash received from customers, cash payments made to suppliers, and any other cash inflows or outflows. By comparing the bank statement with the cash account in the general ledger, discrepancies can be identified and reconciled to ensure the accuracy of the business's cash records.

The question states that the outstanding check is for the purchase of supplies. In a bank reconciliation, outstanding checks are checks that have been issued but have not yet cleared the bank. Since the check is for the purchase of supplies, it means that the supplies have already been recorded in the company's books. Therefore, there is no need for a journal entry to record this reconciling item as it has already been accounted for.

The journal entry would be to debit Cash for $884, which represents the total cash count of $984 in the cash drawer minus the change fund of $100. The credit would be to Revenues for $882, which represents the cash sales from the cash register tapes. Additionally, there would be a credit to Cash Short and Over for $2, which represents the difference between the actual cash count and the cash sales.