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)