16) The bank statement reports the activity in the customer’s account and is issued on an annual basis.
17) The bank statement shows the beginning and ending balances of cash in a bank account, cash receipts
and payments, and the names of all individuals who are authorized to sign checks.
18) Banks must return physical copies of the maker’s canceled checks.
19) Which of the following statements is correct?
A) A bank statement is a document from the bank that reports the activity in the customer’s account.
B) A bank statement must be mailed to customers each month.
C) The bank statement does not include an ending balance of the customer’s account because the bank
cannot determine which checks have been cashed during the statement period.
D) Physical copies of canceled checks must be included in the monthly bank statement.
20) The bank statement ________.
A) must include physical copies of canceled checks
B) must be mailed to customers each month
C) does not include an ending balance of the customer‘s account because the bank cannot determine
which checks have been cashed during the statement period
D) may show service charges, EFT collections from customers, and EFT withdrawals
21) Which of the following items will NOT appear as deductions on a bank statement?
A) NSF checks
B) EFT
C) Service Charge
D) Deposits
22) Electronic funds transfers move cash by electronic communications.
23) Electronic funds transfers are a system that transfers cash by using paper documents.
24) Debit card transactions are considered electronic funds transfers.
25) An electronic funds transfers system ________.
A) does not include debit card transactions
B) is seldom used by businesses
C) transfers cash by electronic communication rather than by paper documents
D) uses forms such as checks and deposit tickets to transfer cash
26) Electronic funds transfers ________.
A) are more expensive than mailing a check to make a payment
B) are a way of moving cash by paper documents
C) include direct deposits and debit card transactions
D) do not appear on the bank statement
27) All items on the book side of the bank reconciliation require journal entries.
28) Bank errors are posting errors made by the bank that either incorrectly increase or decrease the
depositor‘s bank balance.
29) If a bank reconciliation includes interest revenue collected by a bank, a journal entry is required which
credits Cash and debits Interest Revenue.
30) In a bank reconciliation, a NSF check will be shown on the book side of the reconciliation.
31) The difference that arises between the balance on the bank statement and the balance on the
company’s books because of a time lag in recording transactions is known as a permanent difference.
32) The difference that arises between the balance on the bank statement and the balance on the
company’s books because of a time lag in recording transactions is known as a timing difference.
33) A check was written by a business for $507 but was recorded in the journal as $705. How would this
error be included on the bank reconciliation?
A) a deduction on the bank side
B) an addition on the book side
C) an addition on the bank side
D) a deduction on the book side
34) The bank recorded a $3,000 deposit as $300. How would this information be included on the bank
reconciliation?
A) a deduction on the bank side
B) a deduction on the book side
C) an addition on the book side
D) an addition on the bank side
35) A check payment for $658 was incorrectly entered in the Cash account as $856. Which of the following
adjustments needs to be made?
A) decrease the book balance
B) decrease the bank statement balance
C) increase the book balance
D) increase the bank statement balance
36) Which one of the following items requires an adjustment on the bank side of the bank reconciliation?
A) interest earned
B) a bank service charge
C) a note collected by the bank
D) deposits in transit
37) Which one of the following is true of the bank reconciliation?
A) It should not be prepared by an employee who handles cash transactions.
B) It is prepared in place of the cash ledger.
C) It is a financial statement.
D) It guarantees that no errors have been made.
38) A check for which a maker’s bank account has inadequate money to pay the check is known as a(n)
________.
A) nonsufficient funds check
B) outstanding check
C) restrictive check
D) canceled check
39) The following information is available for Ellen’s Fashions, Inc. for the current month.
Book balance end of month
$7,100
Outstanding checks
700
Deposits in transit
4,000
Service charges
100
Interest revenue
50
What is the adjusted book balance on the bank reconciliation?
A) $10,250
B) $7,750
C) $6,950
D) $7,050
40) A company received a bank statement showing a balance of $79,000. Reconciling items included
outstanding checks of $2,300 and a deposit in transit of $9,400. What is the company’s adjusted bank
balance?
A) $67,300
B) $71,900
C) $86,100
D) $69,600
41) A company received a bank statement with a balance of $6,400. Reconciling items included a
bookkeeper error of $400—a $400 check recorded as $800—two outstanding checks totaling $830, a
service charge of $24, a deposit in transit of $260, and interest revenue of $21. What is the adjusted bank
balance?
A) $5,475
B) $5,430
C) $5,027
D) $5,830
42) A company’s Cash account shows an ending balance of $4,600. Reconciling items included a
bookkeeper error of $130 (a $500 check recorded as $630), two outstanding checks totaling $830, a service
charge of $25, a deposit in transit of $250, and interest revenue of $30. What is the adjusted book balance?
A) $4,465
B) $4,020
C) $4,735
D) $5,180
43) In reconciling a bank statement, the bank balance is $1,500, and the checkbook balance is $2,105.
Which of the following is the most probable reason for the checkbook balance being larger than the bank
balance?
A) The bank has not cleared certain outstanding checks.
B) The bank has added interest revenue to the account balance.
C) A deposit in transit was made at the end of the month.
D) The bank received an EFT from a customer.
44) In reconciling a bank statement, the bank balance is $2,100, and the checkbook balance is $2,001.
Which of the following is the most probable reason for the bank balance being larger than the book
balance?
A) There are outstanding checks.
B) The bank has deducted certain amounts for bank service charges.
C) A deposit in transit was made at the end of the month.
D) The company erroneously recorded a check for an amount less than the actual amount.
45) A check was written by a business for $549 but was recorded erroneously in the Cash account as $459.
How would this error be included on the bank reconciliation?
A) an addition on the book side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the bank side
46) The bank statement reveals an EFT received from a customer that has not yet been recorded in the
journal. How would this information be included on the bank reconciliation?
A) an addition on the bank side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the book side
47) The bank statement reveals an EFT payment made to one of the company’s suppliers that has not yet
been recorded in the journal. How would this information be included on the bank reconciliation?
A) an addition on the bank side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the book side
48) A ________ is a document explaining the reasons for the difference between a depositor’s Cash
account in the ledger and the depositor’s cash balance in its bank account.
A) bank statement
B) deposit receipt
C) bank reconciliation
D) remittance advice