Which of the following is correct with respect to a bank reconciliation?

A) Subtract interest earned from the bank's balance.

B) Add service charge to the company's balance.

C) Subtract NSF checks from the company's balance.

D) Add deposits outstanding to the company's balance.

Answer: Subtract NSF checks from the company's balance.

A good internal control system would require that the employee who handles cash must not be involved in:

A) Reconciling the bank statement.

B) The accounts payable function.

C) Hiring decisions.

D) Daily operations of the company.

Answer: Reconciling the bank statement.

Which of the following is NOT a reason why a bank reconciliation is necessary?

A) The company has transactions that the bank has not recorded.

B) Petty cash has a low balance.

C) The bank has transactions that the company has not recorded.

D) Reconciliations provide a control over cash.

Answer: Petty cash has a low balance.

Which of the following items would cause the balance of cash in the bank statement to be greater than the balance of cash in the accounting records?

A) The company wrote checks that have not cleared the bank.

B) The company purchased supplies using a debit card.

C) The company has cash receipts that have not been deposited in the bank.

D) The company deposited a customer check that was found by the bank to have insufficient funds.

Answer: The company wrote checks that have not cleared the bank.

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) The company purchased supplies using a debit card.

B) The company has cash receipts that have been deposited in the bank.

C) The company deposited a customer check that was found by the bank to have insufficient funds.

D) The company wrote checks that have cleared the bank.

Answer: The company deposited a customer check that was found by the bank to have insufficient funds.

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.