Review Accounting & Finance Chapters 5 Cash Control Systems

Name:

True/False
Indicate whether the statement is true or false.

In accounting, money is usually referred to as cash.

Most businesses make major payments with cash.

After a deposit is recorded on the check stub, a checkbook subtotal is not calculated until the next check is written.

Ownership of a check cannot be transferred.

An endorsement on a check may be either written or stamped.

If a bank does not receive payment from the person who signed the check, each endorser of the check is individually liable for payment.

An endorsement consisting only of the endorser's signature is a blank endorsement.

Blank endorsements should be used when sending checks through the mail.

An endorsement consisting of the words "Pay to the order of" and a new owner's name is a special endorsement.

10.

A check with a future date on it is a postdated check.

11.

Most banks will accept postdated checks.

12.

Banks usually refuse to accept altered checks.

13.

Voided checks should be recorded in the journal.

14.

When a bank statement is received, the depositor should verify its accuracy immediately.

15.

On a bank statement reconciliation, the adjusted check stub balance must be the same as the adjusted bank balance.

16.

Using a memorandum as the source document for a dishonored check is an application of the accounting concept Objective Evidence.

17.

The petty cash fund is a liability with a normal debit balance.

18.

As petty cash is paid out, the amount in the petty cash box decreases.

19.

A signature card for a business's checking account should show only the signature of the business owner.

20.

When petty cash is replenished, Petty Cash is debited and Cash is credited.

21.

Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less.

22.

When a deposit is made in a bank account, the bank issues a receipt.

23.

There are four types of endorsements commonly used: blank, special, original, and restrictive.

24.

A check with a blank endorsement can be cashed by anyone who has the check.

25.

When writing a check, the first step is to prepare the check stub.

26.

Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime.

27.

The amount of a check is written twice on each check.

28.

A check that contains errors must be marked with the word VOID, and another check must be written.

29.

An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.

30.

An important aspect of cash control is verifying that the information on a bank statement and in a checkbook is in agreement.

31.

Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount.

32.

Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account.

33.

The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.

34.

The source document for an electronic funds transfer is a memorandum.

35.

The source document for a debit card purchase is a memorandum.

36.

A petty cash fund is used for making large cash payments without writing checks.

37.

Using a petty cash fund usually decreases the number of checks that have to be written.

38.

A memorandum is the source document for the entry to record establishing a petty cash fund.

39.

Anytime a payment is made from the petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.

40.

When the petty cash fund is replenished, the balance of the petty cash account increases.

41.

A check is a common business form for ordering a bank to take cash from its checking account.

42.

If any kind of error is made in preparing a check, a new check should be prepared and the old check should be thrown away immediately.

43.

A bank reconciliation form is prepared by the bank to ensure that the bank has not made mistakes.

44.

In order to control cash, one common method is to ensure that cash payments are paid by pre-numbered checks.

45.

A debit card holder still must remember to write a check for the purchase even though the debit card has been used for the purchase.

46.

When a business uses EFT to pay vendors, previous arrangements have been made with its bank to process the transactions.

47.

A bank requires that the signature of the person authorized to sign checks be on the signature card.

48.

The petty cash slip is the source document for the entry to replenish petty cash.

49.

As petty cash is paid out, the balance of the petty cash account decreases.

50.

The only difference in the journal entry for a cash payment by check and a cash payment by electronic funds transfer is the source document.

Multiple Choice
Identify the choice that best completes the statement or answers the question.

51.

A business form ordering a bank to pay cash from a bank account is a ____.

a.	signature card	c.	check
b.	deposit slip	d.	none of the above

52.

A check must be signed with ____.

a.	the same signature as on the signature card
b.	only the first and last name
c.	a restrictive endorsement
d.	black ink

53.

Each time cash or checks are placed in a bank account, the customer prepares a ____.

a.	signature card	c.	check
b.	deposit slip	d.	none of the above

54.

A signature or stamp on the back of a check transferring ownership is ____.

a.	a signature card	c.	an endorsement
b.	a deposit slip	d.	none of the above

55.

An endorsement on the back of a check consisting only of a signature is ____.

a.	a blank endorsement	c.	a restrictive endorsement
b.	a special endorsement	d.	an incorrect endorsement

56.

A lost check with a blank endorsement on it can be cashed by ____.

a.	anyone who has the check
b.	only the person whose name follows the words "Pay to the order of"
c.	only the person who endorsed the check
d.	no one

57.

An endorsement on the back of a check consisting of the words "Pay to the order of" and a new check owner's name is a ____.

a.	blank endorsement	c.	restrictive endorsement
b.	special endorsement	d.	signature endorsement

58.

If a check is endorsed on the back with the words "For deposit only," the check can be cashed by ____.

a.	anyone who has the check
b.	the person whose name follows "Pay to the order of"
c.	only the person who signed the check
d.	no one--it must be deposited

59.

If any kind of error is made in preparing a check, ____.

a.	a new check should be prepared
b.	VOID should be written on the check stub
c.	VOID should be written on the check
d.	all of the above

60.

The source document for journalizing a bank service charge is a ____.

a.	check	c.	memorandum
b.	receipt	d.	none of the above

61.

The source document for journalizing an electronic funds transfer is a ____.

a.	check	c.	memorandum
b.	receipt	d.	none of the above

62.

The entry to establish a $200.00 petty cash fund is ____.

a.	debit Cash, $200.00; credit Petty Cash, $200.00
b.	debit Miscellaneous Expense, $200.00; credit Cash, $200.00
c.	debit Petty Cash, $200.00; credit Cash, $200.00
d.	debit Petty Cash, $200.00; credit Miscellaneous Expense, $200.00

63.

A form showing proof of a petty cash payment is a ____.

a.	check	c.	petty cash check stub
b.	petty cash slip	d.	journal

64.

A petty cash fund is always replenished ____.

a.	daily	c.	at the end of the month
b.	weekly	d.	none of the above

65.

The bank statement shows a checking account balance of $5,500.00. There are outstanding checks totaling $600.00, an outstanding deposit of $400.00, and a bank service charge of $15.00. The checking account balance should be ____.

a.	$5,300.00	c.	$5,285.00
b.	$5,700.00	d.	none of the above