Accounting Chapter 6
____ checks are returned to a depositor with a bank statement
Cancelled
What are the six reasons a bank may dishonor a check?
Check appears to be altered, signatures don't match, amounts written don't match, check is postdated, person who wrote the check stopped payment, insufficient funds
What does FDIC for?
Federal deposit insurance corporation
What is one advantage of a checking account?
Gives proof of purchase
____ checks are checks issued by a depositor that have not been yet reported on a bank statement
Outstanding
Special endorsements include the words ____ ___ __ ___ __ and the name of the new check owner
Pay to the order of
(T/F) Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account as well
True
T/F: If any kind of error is made in preparing a check, a new check should be prepared.
True
T/F: No journal entry is needed for deposits because the cash receipts have already been journalized
True
T/F: Only the person or business named in a special endorsement can cash, deposit, or further transfer ownership of the check
True
T/F: Petty cash fund is always replenished at the end of each month so that all of the expenses are recorded in the month they are incurred
True
T/F: Special endorsements are sometimes known as endorsements in full
True
What are the four reasons a bank's records and a depositor's records may differ, while the bank's records are still correct?
Unrecorded service charge, outstanding deposits, outstanding checks, math or recording errors
What are 2 purposes of a signature card?
Verifies signature, tells who is authorized to sign on account
A _____ is the source document for the entry to record establishing a petty cash fund
check
A signature or stamp on the back of a check transferring ownership is called an ______
endorsement
Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are _____
greater
A _____ is the source document for a bank service charge transaction
memorandum
The source document for a debit card purchase is a _____
memorandum
The source document for an electronic funds transfer is a _______
memorandum
An amount of cash kept on hand and used for making small payments is called ___ ___
petty cash
A form showing proof of a petty cash payment is called a ____ ___ __
petty cash slip
Anytime a payment is made from the petty cash fund, a ___ ___ __ is prepared showing proof of a petty cash payment
petty cash slip
A check with a future date on it is called a _________ ___
postdated check
An endorsement indicating a new owner of a check is called a _____ _____
special endorsement
Many businesses have a ___ prepared with a restrictive endorsement
stamp
(T/F) when a deposit is made in a bank account, the bank issues a receipt
true
The amount of a check is written ___ on each check
twice
Up to how much money is a checking account insured?
250,000
What does ABA stand for?
American Bankers Association
(T/F) A petty cash fund is used for making large cash payments without writing checks
False
(T/F) Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime
False
(T/F) The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check
False
T/F: Federal regulations DO NOT require an endorsement to be confined to a limited amount of space on the back of a check
False
T/F: If a check with a blank endorsement is lost or stolen, the check cannot be cashed by anyone who has possession of it
False
An endorsement restricting further transfer of a check's ownership is called a ____ ____
Restrictive endorsement
What's a disadvantage of a checking account?
Service fees
(T/F) A check with a blank endorsement can be cashed by anyone who has the check
True
(T/F) Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount
True
A report of deposits, withdrawals, and bank balances sent to a depositor by a bank is called a _____ ___
bank statement
A check stub is prepared ___ a check is written
before
An endorsement consisting only of the endorser's signature is called a ____ ____
blank endorsement
What are the three types of endorsements?
blank, restrictive, special
A check stub with no ___ ___ indicates an outstanding check
check mark
A bank account from which payments can be ordered by a depositor is called a ___ ____
checking account
A bank card that, when making purchases, automatically deducts the amount of the purchase from the checking account of the card holder is called a ____ ___
debit card
Using a petty cash fund usually ____ the number of checks that have to be written
decreases
A check that a bank refuses to pay is called a ____ ____.
dishonored check
A computerized cash payments system that uses electronic impulses to transfer funds is called ____ ____ ___
electronic funds transfer (EFT)
