Principles of Accounting Ch. 9

After a bank reconciliation statement is completed, a firm may have to make an entry in its accounting records for

NSF checks.

A check issued for $1,980 to pay a vendor on account was recorded in the firm's records as $1,890; the canceled check was properly listed on the bank statement at $1,980. To arrive at an accurate balance on a bank reconciliation statement, the error should be

deducted from the book balance.

A firm's bank reconciliation statement shows a book balance of $15,820, an NSF check of $400, and a service charge of $20. Its adjusted book balance is

$15,400.

Merchandise costing $5,600 with terms of 1/10, n/30, with transportation costs of $320 included on the invoice (not included in the $5,600) is sold on account. If the bill is paid within ten days, the amount of the purchase discount is

$56.00.

Identify the procedure below that is NOT essential for proper control over cash payments.

Make all payments out of a petty cash fund or a travel and entertainment fund.

The entry to create a petty cash fund includes

a debit to Petty Cash Fund and a credit to Cash.

Valerie's Market uses a perpetual inventory system when recording its cash payments and cash receipts. The business sells $6,000 of goods to a charge account customer with terms of 1/10, n/30. If the customer pays within the discount period, the entry to record the receipt of cash from the customer would include:

a debit to Sales Discounts for $60 and a credit to Accounts Receivable for $6,000

To arrive at an accurate balance on a bank reconciliation statement, an error made by the bank in which the bank deducted a check issued by another business from the balance of the company's bank account should be

added to the bank statement balance.

A firm appropriately wrote a check for $78 but entered the amount as payment of $87 in its records. On a bank reconciliation statement this error would be shown as

an addition of $9 to the book balance.

Included with its bank statement a firm may receive a credit memorandum, which could indicate

an addition to the firm's account balance because the bank collected the amount due on a promissory note from a customer of the firm.

Upon collection of the amount due on an interest-bearing promissory note from a customer, the accountant would debit Cash, credit Notes Receivable, and

credit Interest Income.

To record the payment of a purchase invoice when a cash discount is taken, the accountant would

debit Accounts Payable, credit Purchases Discounts, and credit Cash.

To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be

deducted from the bank statement balance.

To arrive at an accurate balance on a bank reconciliation statement, a service charge should be

deducted from the book balance.

Hawthorne Inc. uses the perpetual inventory system when recording its cash payments and cash receipts. If the company issues a check to pay for goods purchased and they pay within the discount period, identify the account used to record the discount.

merchandise inventory

Which of the following statements is NOT correct regarding the cash receipts journal?

Before any posting to the general ledger takes place, the equality of the debits and credits recorded in the cash receipts journal are proved.

Of the four categories shown in the form above, which category or categories require journal entries in the firm's records?

Book Balance of Cash Additions and Book Balance of Cash Deductions

Beckett Co. sold merchandise on account for $10,600, terms 2/10, n/30. Freight charges of $250 were prepaid by the seller and added to the invoice. The customer returned $800 of merchandise before making the payment then paid the invoice within the discount period. What is the amount Beckett Co. received?

$9,854

Phones R Us uses a perpetual inventory system when recording its cash payments and cash receipts. In June, the business purchases $5,000 of goods on account with terms of 2/10, n/30. Select the correct entry to record the payment of the goods within the discount period.

Accounts payable..............$5,000 Merchandise inventory........$100 Cash..............................................$4,900

The March bank reconciliation statement for Cab World, Inc., showed an NSF check of $300 from J. Brown as well as a bank service charge of $20 for monthly service fees. Select the journal entry required to record these items.

Accounts receivable/J.Brown...............$300 Band Fees expense................................... $20 Cash..................................................................$320

Which of the following statements is not correct?

The entry to record the receipt of a promissory note to replace an open account is recorded in the cash receipts journal.