chapter 7 part 3

Question 1

Bank Reconciliation Points

Answer 1

1. Done on a timely basis (preferably monthly).
   2. An internal control procedure.
   3. Probably will need to make journal entries.
   4. Why? To record revenues and expenses in proper period and thus, to
   correctly state cash to reflect timing difference and any errors.

Question 2

Electronic Funds Transfer

Answer 2

electronic funds transfer

on-line paying and receiving money

Question 3

Deposit in Transit

Answer 3

Deposit in transit
Business made deposit at bank, recorded it in their records but it is not as
yet on the banks records (or the funds are not as yet available to use).

Question 4

O/S check

Answer 4

 Outstanding checks
Business has written and recorded check but it has not as yet cleared their
bank account. “Clearing” means that the bank has provided the money to payee (holder) of the check and deducted from payor (maker) of check.

Question 5

NSF

Answer 5

 Non-sufficient funds
(“bouncing check” in this course it is always from our customer—we would “never” write a check without funds to back it up).

Question 6

The Entries for This Section

Answer 6

dr: Cash
cr: AccRec
So, during reconciliation when business knows check has been returned
to the business from the bank marked NSF then the business records:
dr: AccRec
cr: Cash

Question 7

Line of Credit

Answer 7

Pre-established loan that will back up your checking

account in case you need funds quickly. Generally you draw on the account by writing a check.

Question 8

To adjust bank balance

Answer 8

place all items that appear on business records

but not as yet on the bank records. Note: no journal entries necessary since they are already on business records.

Question 9

To adjust book balance

Answer 9

place all items that appear on bank statement and not yet in business records. (Journal entries must be done for these items in order to adjust cash ledger).