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

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

Question 1

Which of the following best describes the 'Fraud Triangle' in the context of financial accounting?

Accepted Answer

It consists of three elements: Motive, Opportunity, and Rationalization.

Question 2

Which of the following is NOT a primary objective of an internal control system?

Accepted Answer

Promote operational efficiency above all other objectives

Question 3

A company discovers that an employee has been processing excessive refunds to themselves. Which internal control procedure would most likely detect this fraud?

Accepted Answer

Exception reporting

Question 4

Which of the following is an example of a preventative internal control?

Accepted Answer

Separation of duties

Question 5

A company’s bank statement shows a service charge of $25 that was not recorded in the company’s books. How should this be reflected in the bank reconciliation?

Accepted Answer

Subtract $25 from the book balance

Question 6

Which of the following is NOT considered a cash equivalent on the balance sheet?

Accepted Answer

Shares of Apple stock

Question 7

A company’s cash ledger shows a balance of $$5,000. The bank statement shows a balance of 5$$,500. There is a deposit in transit of $$1,000 and outstanding checks of 1$$,200. What is the adjusted bank balance?

Accepted Answer

$5,300

Question 8

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To explain differences between the company’s cash records and the bank statement

Question 9

Which of the following is a limitation of internal controls?

Accepted Answer

Collusion among employees

Question 10

Which of the following would require a journal entry after preparing a bank reconciliation?

Accepted Answer

Bank collection of a note receivable

Question 11

A company’s internal control system includes the use of passwords and encryption. What risk are these controls primarily designed to address?

Accepted Answer

Unauthorized access to computer systems

Question 12

Which of the following is an example of a detective (monitoring) control?

Accepted Answer

Bank reconciliation

Question 13

Which of the following is a reason why companies prefer to make payments by check or EFT rather than cash?

Accepted Answer

It provides a record of payment and requires authorization.

Question 14

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

Accepted Answer

Financial leverage

Question 15

Which of the following best describes unsupervised machine learning in the context of expense reimbursement fraud detection?

Accepted Answer

It identifies unusual receipts as possible fraud cases without prior labeling.

Question 16

A company’s bank reconciliation includes the following items: deposit in transit $$2,000, outstanding checks 1$$,500, bank service charge $$50, and interest earned 30. $$What is the correct adjustment to the book balance?

Accepted Answer

Add $$30 and subtract 50$$

Question 17

Which of the following is a common type of expense reimbursement fraud?

Accepted Answer

Overstated expenses

Question 18

If a company’s management overrides internal controls, what is the most likely result?

Accepted Answer

Increased risk of fraud

Question 19

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

Accepted Answer

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

Question 20

Which of the following best explains why the adjusted bank balance and adjusted book balance should be equal after completing a bank reconciliation?

Accepted Answer

Because all timing differences and errors have been accounted for

Internal Control and Cash: Study Notes for Financial Accounting

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