Accounting Ch. 7
Each check should be identified by its
ABA number
A check involves three parties. The person who orders the bank to pay a certain amount of money is called the
drawer
If, in the effort to prove cash, a shortage is found, the amount is treated as a(n)
expense
When it is necessary to replenish the petty cash fund, the petty cashier prepares a statement of payments.
False
To use an ATM machine, the depositor must have a
PIN number
The bank statement for a checking account normally shows the
amount of deposits and other credits added during the period
Whenever the bank mails a credit memo to the depositor indicating the amount of interest credited to the account, the transaction that would be entered in the accounting records of the depositor would include
debiting Cash and crediting Interest Earned
A petty cash fund of $200 has $27 in cash, $170 in petty cash vouchers, and $3 in miscellaneous receipts not included with the petty cash vouchers. The debit to the Cash Short and Over would be
$0
The petty cash payments record indicates classified expenditures as follows: Automobile Expense, $20; Supplies Expense, $12; Postage Expense, $6; and Miscellaneous Expense, $5. The journal entry to replenish the petty cash fund would include a credit to Cash for
$43
Cash usually means only currency and coins.
False
If the cash short and over account has a credit balance at the end of the fiscal year, the balance represents an expense or loss.
False
If the cash short and over account has a debit balance at the end of the fiscal year, the balance represents a revenue.
False
A cash shortage is entered as a debit to Cash Short and Over and a credit to Cash.
True
A debit journal entry to the cash short and over account is used to record a cash shortage.
True
To a business, cash includes currency, coins, checks, money in the checking accounts, money orders, and bank cashier's checks.
True
To complete transactions with the bank, electronic funds transfer (EFT) systems use
a computer
A depositor may endorse checks with a rubber stamp.
True
A special ledger account entitled "Change Fund" is used to keep track of day-to-day shortages and overages of cash.
False
Cash receipts of $719 and a cash count of $715 would indicate a cash overage.
False
A check is a document ordering the depositor to pay cash from the bank's account.
False
A depositor is not responsible or liable to the bank for items deposited that are not honored when presented for payment.
False
A restrictive endorsement makes a check payable to any bearer.
False
A restrictive endorsement means that the check is payable to any bearer.
False
If the depositor's book balance is not the same as the bank's book balance, an error has occurred.
False
In reconciling the bank statement, the outstanding checks are added to the balance shown on the bank statement.
False
Posting must be done from the petty cash payments record.
False
A receipt called a petty cash voucher should be prepared for every payment from the petty cash fund.
True
If the person who is named as payee on a check transfers the right to receive the money by signing his/her name on the back of the check, the signature is called a
blank endorsement
The key documents and forms required in opening and using a checking account are the signature card, deposit tickets, checks, and bank statements.
True
To reconcile the bank statement, which of the following amounts would be subtracted from the checkbook balance?
service charge
A debit to Accounts Receivable for $50 and a credit to Cash for $50 would be an accurate journal entry to record
not sufficient funds (NSF) checks
On a bank reconciliation, checks issued during the period that were not presented to the bank for payment before the bank statement was prepared are known as
outstanding checks
To reconcile the bank statement, which of the following amounts would be subtracted from the bank statement balance?
outstanding checks
To establish a change fund, Cash should be credited and Change Fund should be debited.
True
The bank in which the depositor has money on deposit is known as the drawer.
False
A special form of receipt showing the name of the payee, the purpose of the payment, and the account to be charged for each petty cash payment is known as a petty cash voucher.
True
In reconciling a bank statement, the bank statement balance is $1,000 and the balance per books is $1,205. A bank service charge is $15; a deposit in transit totals $500, and outstanding checks total $300. The adjusted book balance is
$1,190
The depositor who orders the bank to pay a certain amount of money is known as the drawee.
False
The difference between the balance in the cash account on the depositor's books and the bank's books is usually due to errors.
False
The petty cash fund should be replenished only at the end of each accounting period so that the accounts are brought up-to-date.
False
The petty cash payments record is a special journal that takes the place of entering these transactions in the two-column journal.
False
When a check is written to replenish the petty cash fund, it is entered in the journal by debiting the proper accounts indicated in the Distributions columns of the petty cash record and by crediting Cash Over and Short.
False
Businesses commonly use cash registers with tapes that accumulate a record of the day's cash receipts.
True
Calculator A check deposited that is not paid because the drawer did not have sufficient funds is called an NSF check.
True
Every person authorized to sign checks for a business must complete and sign a signature card for the bank.
True
It is good business policy that all cash and cash items received be deposited daily in a bank.
True
On a deposit ticket, checks should be listed in numerical order.
True
On any given day, it is unlikely that the balance in the cash account on the depositor's general ledger (or books) will be the same as the bank balance.
True
Once an entry is made to establish a change fund, no other entries are made to this account.
True
Outstanding checks are checks issued that have not yet been presented to the bank for payment.
True
Payments from the petty cash fund should not be made without obtaining some sort of receipt in return.
True
The check written to establish the petty cash fund is recorded in the journal by crediting Cash and debiting Petty Cash.
True
The person directed to receive the money indicated by a check is known as the payee.
True
Cash Sales from the cash register tapes totaled $882. There is a change fund of $100. The cash count indicates that $984 is in the cash drawer. What journal entry would be required?
debit Cash for $884; credit Revenues for $882, and Cash Short and Over for $2
The petty cash payments record indicates classified expenditures as follows: Automobile Expense, $20; Supplies Expense, $12; Postage Expense, $6; and Miscellaneous Expense, $5. The transaction would include
debiting Automobile Expense
The term "cash" has several different meanings.
True
A petty cash fund of $200 has $17 in cash, $180 in petty cash vouchers, and $3 in miscellaneous receipts not included with the petty cash vouchers. The proper journal entry to replenish the fund would include a credit to Cash for
$183
A check involves three parties. The person directed to receive the money is called the
payee
The process of bringing the book and the bank balance into agreement is called
reconciling the bank statement
To sign the back of a check with the name of the company and "Pay to any bank" is an example of a
restrictive endorsement
A special multi-column record that supplements the regular accounting records and from which no posting is done is called a
petty cash payment record
A special form of receipt showing the name of the payee, the purpose of the payment, and the account to be charged for each petty cash payment is known as a
petty cash voucher
In reconciling a bank statement, the bank statement balance is $1,000 and the balance per books is $1,205. A bank service charge is $5; a deposit in transit totals $500; and outstanding checks total $300. The journal entry for a bank service charge would include
debiting Miscellaneous Expense and crediting Cash
The check written to establish the petty cash fund is entered in the journal by
debiting Petty Cash and crediting Cash
Check No. 450, a payment of $54 for the telephone bill, was incorrectly entered on the check stub as $45. Which of the following adjustments needs to be made?
decrease the book balance
On a bank reconciliation, deposits that were not entered by the bank before the bank statement was prepared are known as
deposits in transit
To reconcile the bank statement, which of the following amounts would be added to the bank statement balance?
deposits in transit
A check involves three parties. The bank in which the drawer has money on deposit is called the
drawee
