Question 1

Which of the following is NOT a characteristic of an effective system of internal control?

Accepted Answer

Combination of duties

Question 2

When preparing a bank reconciliation, which item does NOT require a journal entry?

Accepted Answer

Outstanding checks

Question 3

A debit memo for an NSF check appears on Cynthia’s Cat Designs’ bank statement. How should this be reported on the bank reconciliation?

Accepted Answer

Subtract from book balance

Question 4

A debit memo for a bank service charge is found on the bank statement. How should this be reported on the bank reconciliation?

Accepted Answer

Subtract from book balance

Question 5

A credit memo for a note collection, including $18 interest, is found on Cynthia’s Cat Designs’ bank statement. How should this be reported on the bank reconciliation?

Accepted Answer

Add to book balance

Question 6

A deposit in transit at the end of the month is found on Cynthia’s Cat Designs’ books but not on the bank statement. How should this be reported on the bank reconciliation?

Accepted Answer

Add to bank balance

Question 7

A deposit in transit from the previous month has cleared the bank in the current month. How should this be reported on the bank reconciliation?

Accepted Answer

Would not appear on a bank reconciliation

Question 8

Outstanding checks at the end of the month are found on Cynthia’s Cat Designs’ books. How should this be reported on the bank reconciliation?

Accepted Answer

Subtract from bank balance

Question 9

If a check was recorded correctly on the books as $$223 but appears on the bank statement as 232$$, how should this error be reported on the bank reconciliation?

Accepted Answer

Add to bank balance

Question 10

Calculate the adjusted cash balance for Cynthia’s Cat Designs using the following data:
Bank statement balance: $$10,200
Balance per books: 9$$,559
Debit memo (NSF check): $$259
Debit memo (service charge): 25
$$Credit memo (note collection, including $$18 interest): 1$$,818
Deposit in transit, 8/31: $$4,434
Outstanding checks, 8/31: 3$$,550
Check #102 recorded as $$223, appears as 232 on $$bank statement.
What is the adjusted cash balance?

Accepted Answer

$11,093

Question 11

If a bookkeeper records a deposit of $$530 as 350$$, how should this error be shown on the bank reconciliation?

Accepted Answer

$180 addition to the book balance

Question 12

Susan Bingham is responsible for purchasing, storing, distributing, and inventorying supplies for Mack Company. Which internal control characteristic is missing?

Accepted Answer

Separation of duties

Question 13

A check for $$435 written by Overture Corporation was erroneously recorded in the cash disbursements journal as 354. $$How should this be reported on the bank reconciliation?

Accepted Answer

Deduct from book balance

Question 14

A $250 deposit was made on the last day of the month but did not appear on the bank statement. How should this be reported on the bank reconciliation?

Accepted Answer

Add to bank statement balance

Question 15

The bank statement shows interest earned of $45. How should this be reported on the bank reconciliation?

Accepted Answer

Add to book balance

Question 16

The bank statement includes a check from a customer that was marked NSF. How should this be reported on the bank reconciliation?

Accepted Answer

Deduct from book balance

Question 17

The bank statement shows the bank credited Overture's account for a $600 deposit made by the Overton Company. How should this be reported on the bank reconciliation?

Accepted Answer

Deduct from bank statement balance

Question 18

Which of the following items is an addition to the book balance of cash?

Accepted Answer

Check written for $$20 by the company but recorded as 200 by $$the bookkeeper.

Question 19

Which of the following is NOT an example of a control procedure?

Accepted Answer

A sound marketing plan.

Question 20

Which of the following is an example of poor internal control?

Accepted Answer

Requiring the mailroom clerk to immediately record daily cash receipts in the cash receipts journal

Question 21

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

Accepted Answer

To ensure company sales targets are met

Question 22

Which of the following is NOT an element of internal control over cash disbursements?

Accepted Answer

The person responsible for approving a cash payment should also be responsible for payment.

Bank Reconciliation and Internal Controls – Step-by-Step Study Guide

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