Which of the following items would cause the balance of cash in the bank statement not to equal the balance of cash in the accounting records?

A) Interest earned on the bank balance that the company has not recorded.

B) Checks written by the company that have not cleared the bank.

C) Cash receipts by the company that have not been deposited in the bank.

D) All of the other answers would cause cash balances to differ.

Answer: All of the other answers would cause cash balances to differ.

What is the primary purpose of a bank reconciliation?

A) To ensure that debits equal credits for all cash transactions.

B) To ensure that customers are paying amounts owed on a timely basis.

C) To ensure the bank balance per reconciliation is equal to the company balance per reconciliation.

D) To ensure cash receipts are greater than cash disbursements

Answer: To ensure the bank balance per reconciliation is equal to the company balance per reconciliation.

A bank reconciliation reconciles the bank statement with the company's:

A) Cash from operating activities.

B) Net cash flow in the statement of cash flows.

C) Cash account in the balance sheet.

D) Net income in the income statement.

Answer: Cash account in the balance sheet.

Which of the following would NOT represent good controls over cash disbursements?

A) Periodically verify amounts shown in the debit card and credit card statements against purchase receipts.

B) The employee verifying the accuracy of the debit card and credit card statements should not also be the employee responsible for actual purchases.

C) Set maximum purchase limits on debit cards and credit cards.

D) Employees responsible for making cash disbursements should also be in charge of cash receipts.

Answer: Employees responsible for making cash disbursements should also be in charge of cash receipts.

Which of the following would NOT represent good controls over cash disbursements?

A) Make all disbursements, other than very small ones, by check, debit card, or credit card.

B) Require only one signature for checks, especially larger ones.

C) Authorize all expenditures before purchase and verify the accuracy of the purchase itself.

D) The employee who authorizes payment should not also be the employee who prepares the check.

Answer: Require only one signature for checks, especially larger ones.

A customer makes a $2,000 purchase at ApplianceWorld, paying with a credit card. ApplianceWorld is charged a 2% fee by the credit card company. When recording this sale, ApplianceWorld would:

A) Debit Accounts Receivable for $2,000.

B) Credit Sales Revenue for $2,000.

C) Credit Sales Revenue for $1,960.

D) Credit Deferred Revenue for $2,000.

Answer: Credit Sales Revenue for $2,000.

McGregor Company allows customers to pay with credit cards. The credit card company charges McGregor 3% of the sale. When a customer uses a credit card to pay McGregor $200 for services provided, McGregor would:

A) Debit Cash for $200.

B) Credit Service Revenue for $194.

C) Debit Service Fee Expense for $6.

D) Credit Service Revenue for $206.

Answer: Debit Service Fee Expense for $6.