Q: Which formula correctly calculates the adjusted bank balance in a bank reconciliation?

$$\text{Adjusted Bank Balance} = \text{Bank Statement Balance} + \text{Deposits in Transit} - \text{Outstanding Checks}$$

Question 1

Which of the following is MOST likely to cause a difference between the cash balance shown in a company's ledger and the balance shown on the bank statement at month-end?

Accepted Answer

Outstanding checks that have not yet cleared the bank

Question 2

A company’s bank statement shows a balance of $$3,070. There is a deposit in transit of 2$$,400 and two outstanding checks of $$500 and 900. $$What is the adjusted bank balance after reconciliation?

Accepted Answer

$4,070

Question 3

Which journal entry is required when the bank collects a note receivable of $1,000 on behalf of the company?

Accepted Answer

Debit Cash $$1,000; Credit Note Receivable 1$$,000

Question 4

If a company receives a bank statement showing a service charge of $10, what is the correct journal entry?

Accepted Answer

Debit Miscellaneous Expense $$10; Credit Cash 10$$

Question 5

Which of the following items would be ADDED to the book balance during a bank reconciliation?

Accepted Answer

Interest revenue earned by the bank

Question 6

A company’s ledger shows a cash balance of $$4,095. The bank collected a note receivable of 1$$,000 and interest revenue of $15. What is the subtotal before subtracting any charges?

Accepted Answer

$5,110

Question 7

Which of the following is NOT a purpose of internal controls over cash?

Accepted Answer

To maximize investment returns

Question 8

What is the correct journal entry for an NSF check of $700 from a customer?

Accepted Answer

Debit Accounts Receivable $$700; Credit Cash 700$$

Question 9

Which formula correctly calculates the adjusted bank balance in a bank reconciliation?

Accepted Answer

$$	ext{Adjusted Bank Balance} = 	ext{Bank Statement Balance} + 	ext{Deposits in Transit} - 	ext{Outstanding Checks}$$

Question 10

A company’s bank statement includes an EFT rent expense of $330. What is the correct journal entry?

Accepted Answer

Debit Rent Expense $$330; Credit Cash 330$$

Question 11

Which of the following is an example of a deposit in transit?

Accepted Answer

A cash deposit recorded in the company’s books but not yet appearing on the bank statement

Question 12

If the adjusted book balance after reconciliation is $$4,070 and the adjusted bank balance is also 4$$,070, what does this indicate?

Accepted Answer

The reconciliation is complete and both records agree

Question 13

Which of the following would NOT require a journal entry in the company’s books during bank reconciliation?

Accepted Answer

Outstanding checks

Question 14

A company’s ledger shows a cash balance of $$4,095. After adding bank collection of 1$$,000 and interest revenue of $$15, and subtracting service charge 10$$, NSF check $$700, and EFT rent expense 330$$, what is the final adjusted book balance?

Accepted Answer

$4,070

Question 15

Which of the following is the BEST description of an outstanding check?

Accepted Answer

A check written by the company that has not yet cleared the bank

Question 16

Which of the following is a key reason for performing monthly bank reconciliations?

Accepted Answer

To detect errors and fraud in cash transactions

Question 17

If a company’s bank statement shows interest revenue earned of $15, what is the correct journal entry?

Accepted Answer

Debit Cash $$15; Credit Interest Revenue 15$$

Question 18

Which of the following is the correct formula for calculating the adjusted book balance during bank reconciliation?

Accepted Answer

$$	ext{Adjusted Book Balance} = 	ext{Book Balance} + 	ext{Bank Collections} + 	ext{Interest Earned} - 	ext{Service Charges} - 	ext{NSF Checks} - 	ext{EFT Payments}$$

Question 19

Which of the following is a common error that can be detected through bank reconciliation?

Accepted Answer

A check recorded twice in the company’s ledger

Question 20

Which of the following is the correct journal entry for a $10 bank service charge?

Accepted Answer

Debit Miscellaneous Expense $$10; Credit Cash 10$$

Financial Accounting Study Notes: Bank Reconciliation, Retained Earnings, and Internal Controls

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