32) On a bank reconciliation, outstanding checks are deducted from the balance per books.
33) Canceled checks are negotiable at the bank for the face value.
34) Deposits that have been added to the bank balance but not the checkbook balance are called deposits
in transit.
35) Deposits in transit result because of a timing difference between the bank records and checkbook
records.
36) Any adjustment to the depositor’s records because of an item on the bank statement requires a journal
entry.
37) When adjustments are made to the bank balance when completing a bank reconciliation, a journal
entry is needed to bring the bank balance up to date.
38) Transferring money without paper checks is called electronic funds transfer.
39) If a check marked NSF is returned from the bank, an adjusting entry crediting cash is needed.
40) Construct the bank reconciliation for Kendra’s Tutoring, as of October 31, from the following
information:
Ending checkbook balance $740
Ending bank statement balance 540
Deposits in transit 440
Outstanding checks 280
Bank service charge (debit memo) 40
41) From the following information, prepare the bank reconciliation for Paul’s Photography Studio for
June.
Ending checkbook balance $90
Ending bank statement balance 30
Deposits in transit 90
Outstanding checks 40
Service Charge 10
42) Construct the bank reconciliation for Mitter Company as of July 31, from the following information:
a. Balance per bank statement $9,150
b. Deposit in transit 705
c. Checkbook balance 9,250
d. Outstanding checks 800
e. NSF check (debit memo) 220
f. Service charges 115
g. Interest earned on account 140
43) Prepare a bank reconciliation from the following information:
a. Balance per bank statement of February $4,325
b. Checkbook balance 4,750
c. Collection of note by bank 500
d. Service charges 110
e. Deposit in transit 2,140
f. Outstanding checks 1,325
44) Indicate what effect each situation will have on the bank reconciliation process. Place the number of
your choice beside the items listed.
1. Add to bank balance
2. Deduct from bank balance
3. Add to checkbook balance
4. Deduct from checkbook balance
________ a. deposit in transit
________ b. bank service charge
________ c. NSF check
________ d. Check written for $95 recorded on the company’s ledger as $59
________ e. Outstanding checks
________ f. Check written for $80 recorded as $800
________ g. Check printing charges
________ h. Interest earned on checking account
45) Indicate which adjustments would require a journal entry during the completion of the bank
reconciliation. Place an “X” on the respective line(s).
________ a. Deposit in transit
________ b. Bank service charge
________ c. NSF check
________ d. Check written for $58 recorded on the company’s ledger as $85
________ e. Outstanding checks
________ f. Check written for $42 recorded as $4
________ g. Check printing charge
________ h. Note collected by bank.
46) List the various steps and procedures included in the bank reconciliation process.
What are the advantages in preparing a monthly bank reconciliation?
47) Determine the reconciled bank balance given the following:
The balance per bank statement is $ 110
The balance per general ledger is $107
There is a credit memo for a note collected, $408
There is a credit memo for interest earned, $25
There is a debit memo for a customer’s NSF check $350
Deposits in transit, $850
Outstanding checks amount to $845
This month’s service charge amounts to $50
There is a debit memo for check printing fees, $25
$ ________
48) Determine the unadjusted balance per bank statement given the following:
The balance per general ledger is $210
There is a credit memo for a note collected, $450
There is a debit memo for interest expense, $100
There is a debit memo for a customer’s NSF check $375
Outstanding checks amount to $2,000
This month’s service charge amounts to $50
Deposits in transit amount to $1,500
$ ________
49) Prepare the required journal entries from the bank reconciliation below as of the end of January:
The balance per general ledger is $200
There is a debit memo for interest expense, $100
There is a debit memo for a customer’s NSF check $375
Outstanding checks amount to $2,000
This month’s service charge amounts to $75
Deposits in transit amount to $1,500
50) When completing a bank reconciliation, explain why all adjustments to the checkbook balance require
journal entries?
51) What is the difference between a debit and credit memorandum?
6.3 Learning Objective 6-3
1) What type of an account is the petty cash fund?
A) Revenue
B) Expense
C) Asset
D) Liability
2) A petty cash fund is set up:
A) to pay for large expenses.
B) to pay for small expenses.
C) for the owner to withdraw money for personal use conveniently.
D) None of these answers are correct.
3) The credit recorded in the journal to replenish the petty cash fund is to:
A) Cash.
B) Petty Cash.
C) Accounts Receivable.
D) Accounts Payable.
4) The debit recorded in the journal to establish the petty cash fund is to:
A) Cash.
B) Petty Cash.
C) Accounts Receivable.
D) Accounts Payable.
5) Which of the following accounts would most likely be debited in the replenishment of petty cash?
A) Cash
B) Petty Cash
C) Postage Expense
D) Withdrawals
6) The credit recorded in the journal entry to establish the petty cash fund is to:
A) Cash.
B) Petty Cash.
C) Postage Expense.
D) Withdrawals.
7) A $50 petty cash fund has cash of $20 and valid receipts for $40. The entry to replenish the fund would
include a:
A) credit to Cash for $30.
B) credit to Cash for $40.
C) credit to Petty Cash for $30.
D) debit to Petty Cash for $40.
8) The entry establishing a $175 petty cash fund would include a:
A) debit to Cash for $175.
B) credit to Petty Cash for $175.
C) debit to Petty Cash for $175.
D) debit to Miscellaneous Expense for $175.
9) The Petty Cash account is debited when:
A) the account is being replenished.
B) the account balance is being decreased.
C) the account balance is being increased.
D) when the custodian pays for postage from petty cash.
10) The entry to replenish the petty cash fund debited Insurance Expense for postage. This would cause:
A) Petty Cash to be overstated.
B) Petty Cash to be understated.
C) Postage Expense to be overstated.
D) Insurance Expense to be overstated.
11) Riley’s Limousines’ entry to establish a $75 petty cash fund for the office would include a:
A) debit to Cash for $75.
B) credit to Petty Cash for $75.
C) credit to Cash for $75.
D) debit to Office Expense for $75.
12) The entry to replenish the petty cash fund included a debit to Equipment instead of Supplies for the
purchase of supplies. This would cause:
A) petty cash to be overstated.
B) petty cash to be understated.
C) assets to be overstated.
D) supplies to be understated.
13) The replenishment of the petty cash fund was recorded twice. This would cause:
A) expenses to be overstated.
B) expenses to be understated.
C) petty cash to be overstated.
D) petty cash to be understated.
14) The entry to establish the petty cash fund was not completed. This would cause:
A) cash to be understated.
B) cash to be overstated.
C) assets to be understated.
D) assets to be overstated.
15) The entry to establish the petty cash fund debited Misc. Expense. This would cause:
A) revenues to be overstated.
B) revenues to be understated.
C) expenses to be overstated.
D) expenses to be understated.
16) Which of the following transactions would be recorded in an auxiliary petty cash record?
A) Purchase of first aid supplies
B) Payment of Salaries Expense
C) Owner Withdrawal
D) Purchase of a $2,000 piece of Equipment
17) Which of the following transactions would most likely not be recorded in an auxiliary petty cash
record?
A) Purchase of first aid supplies
B) Purchase of postage stamps
C) Payment on a $600 utility bill
D) Payment of gas for the company vehicle
18) Petty Cash is an asset shown on the balance sheet.
19) The Petty Cash account is used to pay for small items such as postage stamps and supplies.
20) An employee assigned the responsibility for overseeing the petty cash fund is called the custodian.
21) The normal balance of the Petty Cash account is a credit.
22) The Petty Cash account should always be debited when the fund is replenished.
Indicate which effect(s) each situation will have:
1. New check written
2. Recorded in the general journal
3. Recorded in auxiliary petty cash record
4. Petty cash voucher prepared
23) ________ Establishment of petty cash
24) ________ Bought Supplies on account
25) ________ Bought a book of stamps
26) ________ Filled up the company’s van with gas
27) ________ Owner withdrew money from the company for personal use
28) ________ Replenishment of petty cash
29) Prepare journal entries for the following petty cash fund transactions:
Sept. 1 Established a $200 petty cash fund.
30 Replenished the petty cash fund. Currency and coins remaining was $128; approved paid
vouchers were: $12 donation expense; $18 postage; $24 office supplies expense; and $26 miscellaneous
expense.
30) Prepare journal entries for the following petty cash fund transactions:
Nov. 1 Established a $75 petty cash fund.
15 Increased the petty cash fund to have a new balance of $100.
30 Replenished the petty cash fund. Currency and coins remaining were $30. Approved paid
vouchers were: $10 donation expense; $16 postage expense; $30 office supplies expense; and $20 misc.
expense.
6.4 Learning Objective 6-4
1) A company would use a change fund if:
A) there are cash transactions daily.
B) they want to pay the postage expense without writing a check.
C) the owner wants to make personal withdrawals easily.
D) None of these are correct.
2) The change fund is what type of account?
A) Expense
B) Revenue
C) Asset
D) Liability
6.5 Learning Objective 6-5
1) The entry to replenish a $300 petty cash fund, which has cash of $140 and valid receipts for $148,
would include:
A) a credit to Cash for $160.
B) a debit to Petty Cash for $160.
C) a credit to Cash for $148.
D) a credit to Petty Cash for $148.
2) Samantha’s Tutoring Service’s $200 petty cash fund has a shortage of $4. The facts are: $80 in valid
receipts for expenses; $116 in coins and currency. The journal entry to replenish the petty cash fund
would include a:
A) credit to Cash for $80.
B) credit to Petty Cash for $84.
C) credit to Cash Short/Over for $4.
D) debit to Cash Short/Over for $4.
3) Vanessa’s Gymnastics’ cash register tapes do not agree with cash receipts. The facts are: total cash
register tapes $400; total coins and currency $404. The summary journal entry to record the day’s
transactions would include a:
A) $400 debit to Cash; $4 debit to Cash Short/Over; and $404 credit to Sales.
B) $404 debit to Cash; $4 credit to Cash Short/Over; and $400 credit to Sales.
C) $404 debit to Cash and $404 credit to Sales.
D) $400 debit to Cash and $400 credit to Sales.
4) The petty cash overage was not recorded. This would cause:
A) revenues to be overstated.
B) revenues to be understated.
C) expenses to be overstated.
D) expenses to be understated.
5) Cash Short and Over is:
A) a Misc. Expense account.
B) a Misc. Revenue account.
C) a Misc. Expense or Misc. Revenue account depending on the balance in the account.
D) neither a Misc. Expense nor Misc. Revenue.
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6) If the ending balance in the Cash Short/Over account is a credit, it indicates that cash shortages have
exceeded cash overages for the period.
7) If the ending balance in the Cash Short/Over account is a debit, it indicates that cash shortages have
exceeded cash overages for the period.
8) Determine the cash short (-) or over (+) given the following:
The balance per the Petty Cash account $75
The count of coin and currency amounts to $27
There are receipts: for gas of $9, for office supplies of $18, for first aid supplies $14
$ ________
9) Determine the cash short (-) or over (+) given the following:
The balance per the petty cash account $100
The count of coin and currency amounts to $20
There are receipts: for telephone costs of $25, for supplies of $6, for transportation $6, for funeral flowers
$38
$ ________