Chapter 8 Bank Reconciliation

Question 1

T/F: A demand deposit is interest bearing.

Answer 1

False. It’s noninterest bearing

Question 2

T/F: A saving deposit is interest bearing.

Answer 2

True.

Question 3

T/F: A time deposit is interest bearing.

Answer 3

True.

Question 4

A time deposite is similar to a saving deposit but it’s evidenced by a ____ embodied in an instrument called a ____

Answer 4

formal agreement, certificate of deposit

Question 5

T/F: a time deposit may be only be preterminated, not withdrawn on demand.

Answer 5

False. A time deposit may be preterminated or withdrawn on demand or after a certain period of time agreed upon.

Question 6

A bank reconciliation is necessary only for a ____ or ____

Answer 6

demand deposit, checking account

Question 7

The bank statement is a monthly report of the bank to the depositor showing:

Answer 7

1. Beginning cash balance per bank; 2. Deposits made by the depositor and acknowledged by the bank; 3. The checks drawn by the depositor and paid by the bank; The daily cash balance per bank during the month

Question 8

Book reconciling items:

Answer 8

Credit and Debit Memos, Errors

Question 9

Bank reconciling items:

Answer 9

Deposits in Transit, Outstanding Checks, Errors

Question 10

Examples of Credit Memos:

Answer 10

N/R collected by bank in favor of the depositor and credited to the account of the depositor, Proceeds of bank loan credited to the account of the depositor, Matured time deposits transferred by the bank to the current account of the depositor

Question 11

Examples of Debit Memos:

Answer 11

NSF or DAIF Checks, Technically defective checks (no signature or countersignature, uncountersigned erasures, mutilated checks, conflict between amount in words and figures), Bank service charges (charges for interest, collection, checkbook, and penalty), Reduction of loan (amount deducted from the current account of the depositor in payment for loan which the depositor owes to the bank and which has already matured)

Question 12

Deposit in transit

Answer 12

Collections already recorded by the depositor as cash receipts but not yet reflected on the bank statement.

Question 13

Deposits in transit include:

Answer 13

(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 (cash on hand)

Question 14

Outstanding Checks

Answer 14

Checks already recorded by the depositor as cash disbursements but not yet reflected on the bank statement

Question 15

Outstanding Checks include:

Answer 15

(1) Checks drawn and already given to payees but not yet presented for payment (2) Certified checks should be deducted from the total outstanding checks if included therein because they are no longer outstanding for bank reconciliation purposes

Question 16

T/F: There is no preference between the Adjusted balance method, Book to bank method, and Bank to book method.

Answer 16

False. The Adjusted balance method is preferred.