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INTERMEDIATE ACCOUNTING 1 > (C2) BANK RECONCILIATION > Flashcards

(C2) BANK RECONCILIATION Flashcards

1
Q

What are the three kinds of bank deposits?

A
  1. Demand Deposits
  2. Savings Deposits
  3. Time Deposits
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2
Q

This is the current account or checking amount or commercial deposit where deposits are covered by deposit slips and where funds are withdrawable on demand by drawing checks against the bank.

A

Demand Deposits

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3
Q

TRUE OR FALSE. A demand deposit is usually non-interest bearing.

A

TRUE

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4
Q

This is a kind of deposit where the depositor is given a passbook upon the initial deposit. The passbook is required when making deposits and withdrawals.

A

Saving Deposits

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5
Q

TRUE OR FALSE. A SAVING DEPOSIT IS NON-INTEREST BEARING.

A

FALSE. Saving deposits are interest-bearing.

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6
Q

This is similar to saving deposit in the sense that it is interest bearing. this is evidenced by a formal agreement embodied in an instrument called certificate of deposit.

A

Time Deposits

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7
Q

TRUE OR FALSE. Bank reconciliation is applicable for all types of deposits.

A

FALSE. Bank reconciliation is only necessary for a demand deposit or checking account.

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8
Q

TRUE OR FALSE. The books of the company and the bank have equal or the same balances because they are reciprocal accounts.

A

TRUE

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9
Q

This is a statement which brings into agreement the cash balance per book and the cash balance per bank.

A

Bank Reconciliation

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10
Q

The bank reconciliation is usually prepared on what basis?

A

Monthly, because the bank provides the depositor with the bank statement at the end of every month.

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11
Q

This is a monthly report of the bank to the depositor showing the cash balance per bank at the beginning, the deposits made by the depositor and acknowledged by the bank, The checks drawn by the depositor and paid by the bank, and the daily cash balance per month during the month.

A

Bank Statement

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12
Q

TRUE OR FALSE. When a bank statement is received, there are no other attachments involved.

A

FALSE. The canceled checks must be attached as well as any debit or credit memoranda that have affected the depositor’s account.

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13
Q

These are the checks that are issued by the depositor and paid by the bank during the month. They are stamped to show that they have been paid.

A

Canceled Checks

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14
Q

What are the two main classifications of reconciling items?

A
  1. Book Reconciling Items
  2. Bank Reconciling Items
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15
Q

What are the three items under the book reconciling items?

A
  1. Credit Memos
  2. Debit Memos
  3. Errors
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16
Q

What are the three items under the bank reconciling items?

A
  1. Deposits in Transit
  2. Outstanding Checks
  3. Errors
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17
Q

These refer to items not representing the deposits credited by the bank to the account of the depositor but not yet recorded by the depositor as cash receipts.

A

Credit Memos

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18
Q

TRUE OR FALSE. Credit memos have the effect of increasing the bank balance.

A

TRUE

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19
Q

These refer to items not representing checks paid by bank which are charged or debited by the bank to the account of the depositor but not yet recorded by the depositor as cash disbursements.

A

Debit Memos

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20
Q

TRUE OR FALSE. Debit memos have the effect of decreasing the bank balance.

A

TRUE

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21
Q

TRUE OR FALSE. Proceeds of bank loan credited to the account of the depositor is an example of credit memo.

A

TRUE

22
Q

TRUE OR FALSE. An NSF or no sufficient fund check is an example of debit memo.

A

TRUE

23
Q

What is another term for NSF check?

A

(DAIF) Drawn Against Insufficient Fund

24
Q

These are collections that are already recorded by the depositor as cash receipts but not yet reflected on the bank statement.

A

Deposits in Transit

25
Q

TRUE OR FALSE. Reduction of loan is an example of deposits in transit.

A

FALSE. Reduction of loan is an example of debit memo. The examples of deposits in transit includes:
1. Collections already forwarded to the bank for deposit but too late to appear in the bank statement.
2. Undeposited collections or those still in the hands of the depositor.

26
Q

These are checks which are already recorded by the depositor as cash disbursements but not yet reflected on the bank statement.

A

Outstanding Checks

27
Q

TRUE OR FALSE. Outstanding checks include checks drawn and already given to payees but not yet presented for payment; and certified checks.

A

TRUE

28
Q

This is a check where the bank has stamped on its face the word accepted or certified which indicates the sufficiency of fund.

A

Certified Checks

29
Q

What are the three forms of bank reconciliation?

A
  1. Adjusted Balance Method
  2. Book to Bank Method
  3. Bank to Book Method
30
Q

Under this method the book balance and the bank balance are brought to a correct cash balance that must appear on the balance sheet.

A

Adjusted Balance Method

31
Q

Under this method the book balance is reconciled with the bank balance or the book balance is adjusted to equal the bank balance.

A

Book to Bank Method

32
Q

Under this method the bank balance is reconciled with the book balance or the bank balance is adjusted to equal the book balance.

A

Bank to Book Method

33
Q

Among the three methods or forms of bank reconciliation, what is the most preferred?

A

Adjusted Balance Method

34
Q

TRUE OR FALSE. Errors in bank reconciliation are only for the part of the bank.

A

FALSE. Errors are reconciling items of the party which committed them.

35
Q

TRUE OR FALSE. There are no definite rules which can be made whether errors are to be added or deducted.

A

TRUE

36
Q

WHAT IS THE PRO FORMA RECONCILIATION FOR THE ADJUSTED BALANCE METHOD?

A

BOOK BALANCE
Add: CMs
Total
Less: DMs
Adjusted Book Balance

BANK BALANCE
Add: DITs
Total
Less: OCs
Adjusted Bank Balance

37
Q

TRUE OR FALSE.
UNDER THE ADJUSTED BALANCE METHOD, (1) credit memos are always added to book balance and debit memos are always deducted from the book balance; and (2) Deposits in transit are always added to the bank balance and the outstanding checks are always deducted from the bank balance.

A

TRUE

38
Q

WHAT IS THE PRO FORMA RECONCILIATION FOR THE BOOK TO BANK METHOD?

A

BOOK BALANCE
Add: CMs
Add: OCs
Total
Less: DMs
Less: DITs
BANK BALANCE

39
Q

TRUE OR FALSE. The book to bank method means that the book balance is adjusted to equal the bank balance.

A

TRUE

40
Q

TRUE OR FALSE. In the book to bank method, credit memos and outstanding checks are always deducted.

A

FALSE. Credit memos and outstanding checks are added, not deducted.

41
Q

TRUE OR FALSE. In the book to bank method, debit memos and deposits in transit are always deducted.

A

TRUE

42
Q

WHAT IS THE PRO FORMAL RECONCILIATION FOR THE BANK TO BOOK METHOD?

A

BANK BALANCE
Add: DITs
Add: DMs
Total
Less: OCs
Less: CMs
BOOK BALANCE

43
Q

TRUE OR FALSE. The bank to book method means that the bank balance is adjusted to equal the book balance.

A

TRUE

44
Q

TRUE OR FALSE. In the bank to book method, deposits in transit and debit memos are always deducted.

A

FALSE. They are added, not deducted.

45
Q

TRUE OR FALSE. In the bank to book method, outstanding checks and credit memos are always added.

A

FALSE. They are deducted, not added.

46
Q

TRUE OR FALSE. When the account of the depositor is increased the same is credited. When the account of the depositor is decreased the same as debited.

A

TRUE

47
Q

TRUE OR FALSE. A bank fee that is charged to the depositors account is not a reason to prepare a bank reconciliation.

A

FALSE. A bank charge gives rise to the necessity of preparing a bank reconciliation because these service charges are something which the depositor may not know about until the depository receives a report from the bank.

48
Q

TRUE OR FALSE. The bank statement is not the same as the records of the bank.

A

FALSE. The bank statement is an exact copy of the depositor’s ledger in the records of the bank.

49
Q

TRUE OR FALSE. The errors for bank reconciliation will have to be analyzed for proper treatment.

A

TRUE

50
Q

TRUE OR FALSE. A bank reconciliation is a useless statement and is not needed in the corporate world.

A

FALSE. The bank statement is an important statement in order to check if both parties have the same balance at the end of each month.

INTERMEDIATE ACCOUNTING 1 (4 decks)

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