Q: Which of the following is the correct formula for calculating the adjusted bank balance in a bank reconciliation?

$$\text{Ending Bank Balance} + \text{Deposits in Transit} - \text{Outstanding Checks} \pm \text{Bank Errors}$$

Question 1

Which of the following best describes the primary purpose of internal controls within an organization?

Accepted Answer

To safeguard company assets and prevent fraud, waste, and inefficiency.

Question 2

According to the Association of Certified Fraud Examiners, what percentage of a typical organization's revenue is lost to fraud each year?

Accepted Answer

5%

Question 3

Which of the following is NOT a component of internal control?

Accepted Answer

Financial leverage

Question 4

Which of the following is an example of misappropriation of assets?

Accepted Answer

An employee steals cash from the company and falsifies records to cover it up.

Question 5

Which of the following is a tool of effective cash management?

Accepted Answer

Bank reconciliation

Question 6

A bank reconciliation is prepared to:

Accepted Answer

Resolve differences between the bank statement and the company's cash records.

Question 7

Which of the following would be added to the bank side of a bank reconciliation?

Accepted Answer

Deposits in transit

Question 8

Which of the following items would require a journal entry by the company when preparing a bank reconciliation?

Accepted Answer

Bank service charges

Question 9

If a company receives a bank statement showing an NSF check, what is the correct journal entry?

Accepted Answer

Debit Accounts Receivable, Credit Cash

Question 10

Which of the following is included in 'Cash and Cash Equivalents' on the balance sheet?

Accepted Answer

A 3-month U.S. Treasury bill

Question 11

A company’s bank statement shows a service charge of $25 not yet recorded in the company’s books. What is the correct journal entry?

Accepted Answer

Debit Service Expense $$25; Credit Cash 25$$

Question 12

Which of the following best explains why credit memos on a bank statement increase the company’s cash account?

Accepted Answer

Because the bank views the company’s account as a liability, and credits increase liabilities.

Question 13

A company’s cash T-account shows a balance of $$3,856. The bank statement shows a balance of 4$$,610. There are $$445 in deposits in transit and 120 in $$outstanding checks. What is the adjusted bank balance?

Accepted Answer

$4,935

Question 14

Which of the following is NOT a behavioral red flag commonly exhibited by fraudsters?

Accepted Answer

Frequent business travel

Question 15

Which of the following would NOT be included in the calculation of 'Cash and Cash Equivalents' on the balance sheet?

Accepted Answer

Postage stamps

Question 16

A company’s bank reconciliation shows a bank error where a $20 check written by another company was debited to the company’s account. How should this be handled?

Accepted Answer

Add $20 to the bank balance on the bank side of the reconciliation.

Question 17

Which of the following is the correct formula for calculating the adjusted bank balance in a bank reconciliation?

Accepted Answer

$$	ext{Ending Bank Balance} + 	ext{Deposits in Transit} - 	ext{Outstanding Checks} \pm 	ext{Bank Errors}$$

Question 18

Which of the following is a correct journal entry for recording an EFT receipt from a customer for $97?

Accepted Answer

Debit Cash $$97; Credit Revenue 97$$

Question 19

Which of the following is a real-world consequence of failing to implement effective internal controls over cash?

Accepted Answer

Increased likelihood of embezzlement

Question 20

A company’s accountant accidentally recorded a $$175 check as 100. $$What adjustment is needed on the book side of the bank reconciliation?

Accepted Answer

Subtract $75 from the book balance

Internal Control and Cash Management: Study Notes for Financial Accounting

Guida di studio - Domande di pratica

Study guide - Flashcard