Business Math CH4: Banking

Company A had a beginning check stub balance of $1,298.66. A deposit of $250, and a withdrawal of $43.20 were made. What is the ending check stub balance?

$1,298.66 + 250.00 - 43.20 = $1,505.46.

Mia Wong's checking account had a balance of $3,100.55 on July 1. After looking at her bank statement, she noticed an NSF for $60.50, a service charge of $12.55, and a note collected for $600. There was one deposit in transit for $400 and no checks outstanding. What is the reconciled checkbook balance? A) $3,527 B) None of these C) $3,627.50 D) $4,027.50

$3,100.55 - $60.5 - $12.55 + $600 = $3,627.50

Which of the following provides the bank with a company's name, address, and type of account. A) Signature Card B) Check or Draft C) ATM or Debit Card D) Deposit Slip

A) Signature Card

Which of the following Step 3 activities will cause the company's account to be decreased? A) Debit memo B) Credit memo C) Nonsufficient funds

A+C A DM & NSF will cause the account to be decreased.

In the reconciliation process the unrecorded bank service charge is: A) Added to checkbook balance B) Deducted from checkbook balance C) None of these D) Added to bank statement balance E) Deducted from bank statement balance

B) Deducted from checkbook balance

The_____________is the owner of the checking account who wrote the check. A) Payee B) Drawer C) Designee D) Employee

B) Drawer

A ____________ endorsement transfers ownership to anyone holding the check. This is the most risky endorsement. Payable to anyone holding the check.

Blank

A(n) ___________ ____________ increases a company's bank account.

Credit Memo (CM)

A company had a checkbook balance of $1,200. The bank statement indicated that there was a direct deposit of $200 and a $12 service charge. What is the ending balance? A) $988 B) $1,400 C) $1,012 D) $1,388

D) $1,388 Reason: To the checkbook balance, add the deposit and subtract the service charge.

Bank that is ordered to pay is _______________. A) Payee B) Drawer C) Designee D) Drawee

D) Drawee

When there are charges against the bank account, the bank debits the account for these charges. The bank will inform customers of a debit transaction by a _________________.

Debit Memo (DM)

__________ ______________ are deposits that did not reach the Bank by the time the bank prepared the bank statement.

Deposits in transit

Outstanding checks:

Have not been received by bank for processing.

The bank imprint is located on the bottom_________(left/right) section of the check.

Right

True or false: Knowing the amount of written checks and the amount in the bank should help you avoid writing a bad check.

True

If the verbal amount written in words on a check doesn't match the figure amount, the bank will use the (figure/verbal) _____________amount.

Verbal

Which of the following transactions would cause the company's checkbook balance to be LOWER than the bank balance? A) Interest earned B) Outstanding checks C) Deposit in transit D) Direct deposits

A,B,D Reason: The bank has credited (added) the interest earned. This would cause the bank's balance to be higher than the company's checkbook. Reason: Outstanding checks have already been deducted from the company's books, causing the company's books to be lower than the bank's. Reason: The bank has credited (added) the direct deposit. This would cause the bank's balance to be higher than the company's.

Company A had a beginning check stub balance of $1,298.66. A deposit of $250, and a withdrawal of $43.20 were made. What is the ending check stub balance? A) $1,298.66 B) $1,505.46 C) $1,408.66 D) $1,591.86

B) $1,505.46 Reason: $1,298.66 + 250.00 - 43.20 = $1,505.46.

Gracie's Natural Superstore had a beginning check stub balance of $14,300.92. A check was written for $300. What is the ending check stub balance? A) $14,300.92 B) $14,000.92 C) $14,600.92

B) $14,000.92

An unrecorded credit memo for collection of a note should be: A) Ignored B) Added to checkbook balance C) None of these D) Added to bank balance E) Subtracted from checkbook balance

B) Added to checkbook balance

The Federal Reserve limits endorsements to: A)anywhere on the back of the check. B) the top one and a half inches of the back left side of the check. C) the bottom inch of the back right side of the check.

B) the top one and a half inches of the back left side of the check.

Franklin Company has a beginning balance of $28,009.21. Their checking account was debited for $20 and credited for $55.19. What is the ending balance? A) $28,084.40 B) $27,974.02 C) $28,044.40 D)$27,934.02

C) $28,044.40 Note: Beginning balance less the debit, plus the credit.

Which of the following transactions would cause the company's checkbook balance to be HIGHER than the bank balance? A) Interest earned B) Outstanding checks C) Deposit in transit D) Direct deposits

C) Deposit in transit Reason: A DIT is known by the customer and not the bank. This would cause the company's checkbook balance to be higher than the bank balance.

Which transaction would cause the bank balance to be higher than the checkbook balance? A) NSF check B) Service charges C) Note collected D) Deposit in transit

C) Note collected Reason: A note collected by the bank has been credited to the company's bank account; however, the company has not yet recorded the increase.

Which endorsement is the safest form? A) Blank B) Full C) Restrictive

C) Restrictive

Name the three types of endorsements: A) Blank Endorsement, End Endorsement, Restrictive Endorsement B) First Endorsement, Full Endorsement, End Endorsement C)Blank Endorsement, Full Endorsement, Restrictive Endorsement D) Restrictive Endorsement, Open Endorsement, Blank Endorsement

C)Blank Endorsement, Full Endorsement, Restrictive Endorsement

The bank statement of July 31, for Savon Co. showed a balance of $6,008.10, and the checkbook showed a balance of $1,900.40. The bookkeeper of Savon Co. noticed from the bank statement that the bank had collected a note for $666.66. There was a deposit in transit made on July 1, for $1,100.10 along with the outstanding checks of $4,580.54. Check charges were $39.40. The reconciled balance is:

Entries for the bank statement balance: Initial balance = $6,008.10 Checks outstanding = -$4,580.54 Deposit in transit = $1,100.10 Final balance = $6,008.10 + $1,100.10 - $4,580.54 = $2,527.66 Entries for the checkbook balance: Initial balance = $1,900.40 Check charges = -$39.40 Note collected = $666.66 Final balance = $1,900.40 + $666.66 -$39.40 = $2,527.66

The bank statement for Mat Co. revealed a balance of $900, and the checkbook balance showed $1,420. Checks outstanding totaled $35. A check printing charge for $5 was on the bank statement. There was a $50 NSF shown on the bank statement. There was a $500 deposit in transit. What is the reconciled balance? A) $1,045 B) None of these C) $1,040 D) $1,365

Entries for the bank statement balance: Initial balance = $900 Checks outstanding = -$35 Deposit in transit = $500 Final balance = $900 + $500 -$35 = $1,365 Entries for the checkbook balance: Initial balance = $1,420 Check printing charge = -$5 NSF = -$50 Final balance = $1,420 - $50 -$5 = $1,365

The _____________ regulation limits all endorsements to the top 1 1/2 inches of the trailing edge on the back __________(right,left) side of the check.

Federal Reserve, Left

A ____________endorsement transfers ownership, but is not as safe as a restrictive endorsement. Only the person or company named can transfer the check.

Full

A deposit (decreases/increases) _____________ the account holder's checking account.

Increases

__________ ______________ will cause the bank to debit (deduct) from the company's checking account. Also known as a bounced check.

Nonsufficient funds (NSF)

__________ ______________ are checks that the company has written but the Bank has not yet recorded for payment when it sends out the bank statement.

Outstanding Checks

To whom the check is made payable is the_________________. A)Payee B)Employee C)Bank D)Designee

Payee

Term for balancing the company's and bank's records. A) Balance B) Reconcile C) Equating D) Bookkeeping

Reconcile

Balancing the company's checkbook with the bank's books is referred to as _____________.

Reconciling

Businesses keep track of changes to the checking account with a check __________ or a check ___________ that may be attached in a checkbook.

Register, Stub

The______________ contained space for the company's name and address, references, type of account, and signature(s) of the person(s) authorized to sign checks.

Signature Card

A check stub is completed after the check is written so records will be up to date. (T/F)

True

An endorsement may be in writing or by the use of a company stamp. (T/F)

True

Outstanding checks have not reached the bank for processing by the time the bank statement has been prepared. (T/F)

True

Overdraft protection could be a positive factor if a deposit in transit occurs. (T/F)

True

_____________ are attached to checkbooks and are used to keep track of written checks.

check stubs

Bank statements begin with deposits, or increases made to the bank account. The bank will inform customers of a credit transaction by a _________________.

Credit Memo (CM)

Organize the steps for reconciling a bank statement. A) Look for transactions not previously recorded. B) Check for recording errors. C) Identify the outstanding checks. D) Identify the deposits in transit. E) Compare the adjusted balances of the checkbook and the bank statement.

1) Identify the outstanding checks. 2) Identify the deposits in transit. 3) Look for transactions not previously recorded. 4) Check for recording errors. 5) Compare the adjusted balances of the checkbook and the bank statement.

All of the following are types of check endorsements EXCEPT: A) Blank Endorsement B) Restrictive Endorsement C) Full Endorsement D) Partial Endorsement

D) Partial Endorsement

The checkbook balance of Lester Co. was $922.55. The bank statement revealed a balance of $3,881.14. The bank statement showed interest earned of $77 and a service charge of $38.22, along with a deposit in transit of $9,555.88. Outstanding checks totaled $6,142.88. The bookkeeper in further analyzing the bank statement noticed a collection of a note by the bank for $6,815.00. Lester Co. forgot to deduct a check for $482.19 during the month. The reconciled balance is: A) $7,429.18 B) $7,294.14 C) $7,429.14 D) $7,924.14 E) None of These

B) $7,294.14

Which of the following Step 3 activities will cause the company's account to be increased? A) Debit memo B) Credit memo C) Nonsufficient funds

B) Credit memo Reason: A CM will increase the account.