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Bank Reconciliation (Practice Quiz)

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Author:
Harold Averkamp, CPA, MBA

For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided.

If you have difficulty answering the following questions, learn more about this topic by reading our Bank Reconciliation (Explanation).


1.
Checks that have been written by a company but have not yet been charged to the company's checking account are referred to as __________ outstanding checks.
2.
A company's receipts from September 30 that get deposited to the company's bank account on October 1st are referred to as deposits __________ in transit as of September 30.
3.
A general guide for reconciling the bank statement is "Put the item where it __________ isn't".

For items 4-15, select the action necessary to reconcile the bank statement.

4.
Outstanding checks.

Add
To
BOOK
Balance

Wrong.
Checks that have been written are already recorded on the books.

Deduct
From
BOOK
Balance

Wrong.
Checks that have been written have already been recorded on the books.

Add
To
BANK
Balance

Wrong.
Outstanding checks must be DEDUCTED from the balance per the bank statement.

Deduct
From
BANK
Balance

Right!
Outstanding checks must be DEDUCTED from the balance per the bank statement.
5.
Bank service charge.

Add
To
BOOK
Balance

Wrong.
The bank service charge must be DEDUCTED from the balance per the books.

Deduct
From
BOOK
Balance

Right!
The bank service charge must be DEDUCTED from the balance per the books.

Add
To
BANK
Balance

Wrong.
The service charge already appears on the bank statement.

Deduct
From
BANK
Balance

Wrong.
The service charge is already deducted on the bank statement.
6.
Interest credited to bank account.

Add
To
BOOK
Balance

Right!
Add the interest to the Cash balance on the company's books.

Deduct
From
BOOK
Balance

Wrong.

Add
To
BANK
Balance

Wrong.
The interest earned is already recorded by the bank and the amount is included in the bank balance. You need to put the interest where it isn't.

Deduct
From
BANK
Balance

Wrong.
The interest earned has already been ADDED on the bank statement and it is part of the bank balance.
7.
Interest charged to bank account.

Add
To
BOOK
Balance

Wrong.
The interest charged by the bank will need to be DEDUCTED from the balance per books.

Deduct
From
BOOK
Balance

Right!
Deduct the interest charged from the company's Cash balance on the company's books.

Add
To
BANK
Balance

Wrong.
The interest already appears on the bank statement as deduction from the bank balance.

Deduct
From
BANK
Balance

Wrong.
The interest already is shown on the bank statement as a deduction from the bank balance.
8.
Deposit in transit.

Add
To
BOOK
Balance

Wrong.
Deposits in transit already appear on the company's books.

Deduct
From
BOOK
Balance

Wrong.
Deposits in transit already appear on the company's books as additions to the Cash balance.

Add
To
BANK
Balance

Right!
Deposits in transit are added to the balance per the bank statement.

Deduct
From
BANK
Balance

Wrong.
Deposits in transit are ADDED to the balance per the bank statement.
9.
Bank inadvertently charged your bank account for another company's bank fees.

Add
To
BOOK
Balance

Wrong.
The item does not belong to your company and therefore should not be entered into your company's books.

Deduct
From
BOOK
Balance

Wrong.
The item does not belong to your company and therefore should not be entered into your company's books.

Add
To
BANK
Balance

Right!
The bank will need to add this amount to your company's bank balance in order to correct its erroneous deduction.

Deduct
From
BANK
Balance

Wrong.
The bank statement had already deducted this item that should not have been deducted. To correct the problem the bank statement balance needs to be increased.
10.
Bank erred by posting another company's credit memo to your company's bank account.

Add
To
BOOK
Balance

Wrong.
The credit memo does not belong to your company, therefore it should not be added to your book's Cash balance.

Deduct
From
BOOK
Balance

Wrong.
The adjustment should be a deduction from the BANK balance.

Add
To
BANK
Balance

Wrong.
The adjustment should be a deduction from the balance per the bank.

Deduct
From
BANK
Balance

Right!
The adjustment is a deduction to the bank's balance.
11.
Fee charged by bank for returned check.

Add
To
BOOK
Balance

Wrong.
The bank fee needs to be DEDUCTED from the balance in the company's Cash account.

Deduct
From
BOOK
Balance

Right!
The bank fee has to be deducted from the company's Cash account balance as shown on its books.

Add
To
BANK
Balance

Wrong.

Deduct
From
BANK
Balance

Wrong.
The bank fee has already been deducted by the bank on the bank statement.
12.
A company wrote a check for $76 and it cleared the bank for $76. However, the company recorded the check in its Cash account as $67. How is the difference of $9 handled on the bank reconciliation?

Add
To
BOOK
Balance

Wrong.
The company originally deducted $67 from its Cash balance. The company should have deducted $76. This means the company did not deduct enough originally. It must deduct an additional $9 from its Cash BALANCE. Keep in mind that the question is what needs to happen to the Cash BALANCE to have the correct amount of Cash. It is not asking what has to happen to the amount being deducted.

Deduct
From
BOOK
Balance

Right!
An additional $9 must be deducted from the Cash balance, since $67 was not a large enough deduction.

Add
To
BANK
Balance

Wrong.
There is no adjustment to the bank balance; it is proper. The error is in the Cash account on the company's books.

Deduct
From
BANK
Balance

Wrong.
There is no adjustment to the bank balance; it is proper. The error is in the Cash account on the company's books.
13.
A company had a receipt of $989 and correctly prepared its bank deposit slip for $989. However, the company recorded the receipt in its Cash account as $998. How is the difference of $9 handled on the bank reconciliation?

Add
To
BOOK
Balance

Wrong.
The company has already added too much to its Cash account. (The company had recorded an addition of $998, when the correct amount should have been only $989.)

Deduct
From
BOOK
Balance

Right!
The company has to deduct $9, because it originally added $998 and should have added only $989. The Cash account balance was too high and therefore needs to have a deduction of $9.

Add
To
BANK
Balance

Wrong.
There is no adjustment to the bank balance; it is proper. The error is in the Cash account on the company's books.

Deduct
From
BANK
Balance

Wrong.
There is no adjustment to the bank balance; it is proper. The error is in the Cash account on the company's books.
14.
The bank collected a Note Receivable for the company and credited the company's bank account for $1,000.

Add
To
BOOK
Balance

Right!
The amount collected by the bank is on the bank statement, but it is not yet on the books. So it must be added to the Cash account on the books.

Deduct
From
BOOK
Balance

Wrong.
The amount should be added to the book balance.

Add
To
BANK
Balance

Wrong.
The bank statement is already reporting this $1,000 item. The bank balance does NOT need to be adjusted.

Deduct
From
BANK
Balance

Wrong.
The bank statement is properly showing the $1,000 as part of the bank account's balance.
15.
A company deposited a check from a customer into its checking account. A few days later the check was returned with the notation "account closed" and the bank deducted the amount on the bank statement.

Add
To
BOOK
Balance

Wrong.
The amount must be DEDUCTED from the balance in the company's Cash account.

Deduct
From
BOOK
Balance

Right!
The amount gets deducted from the balance in the company's Cash account. It was already deducted by the bank on the bank statement.

Add
To
BANK
Balance

Wrong.
The amount was properly deducted from the bank statement. No further adjustment is needed on the bank statement.

Deduct
From
BANK
Balance

Wrong.
The amount was properly deducted from the bank statement. No further adjustment is needed on the bank statement.
16.
A company's Cash account has a balance of $851 as of October 31. The bank statement for this account reports a balance of $1,430 as of October 31. There are outstanding checks totaling $840 and a deposit in transit of $60. The bank statement shows interest earned of $19, service charges of $30, a customer's returned check of $100, and a check printing fee of $90. The reconciled Cash balance that should be reported on the company’s balance sheet as of October 31 is $__________ .
17.
Which of the following items will require a journal entry to the company's books?

Bank service charge

Right!
The bank service charge is not yet entered on the company's books, so it will require a journal entry.

Deposit in transit

Wrong.
Deposits in transit are already on the company's books, but they do not appear on the bank statement.

Bank error

Wrong.
The bank will need to make a correcting entry in its records in order to correct the bank statement for the company.
18.
Which of the following will NOT require a journal entry to the company's books?

Check printing charge

Wrong.
The check printing charge will require a journal entry to the company's books.

Outstanding checks

Right!
There is no journal entry needed for outstanding checks. Outstanding checks are checks already recorded on the company's books, but they have not yet appeared on the bank statement.

Fee for NSF check

Wrong.
The fee for the NSF check will require a journal entry to the company's books.
19.
A company recorded its check #2754 in its accounting records as $98. However, check #2754 was actually written for $89 and it cleared the bank as $89. What adjustment is needed to the Cash balance per books?

Decrease by $9

Wrong.
The company subtracted $98 from its accounting records instead of $89. That means the company has subtracted $9 too much for check #2754. Therefore the company must add $9 to its Cash balance.

Increase by $9

Right!
The company had subtracted $98 from its accounting records instead of $89. That means the company has subtracted $9 too much for check #2754...causing the balance to be too low by $9. Therefore the company must add $9 to its Cash balance.

None needed

Wrong.
The company had subtracted $98 from its accounting records instead of $89. That means the company has subtracted $9 too much for check #2754...causing the balance to be too low by $9. Therefore the company must add $9 to its Cash balance.
20.
A company recorded its August 15 receipts on its books as $165. However, the receipts were actually $156. The deposit slip for the bank was prepared correctly as $156. What adjustment is needed to the Cash balance per books?

Decrease by $9

Right!
The company added $165 to its accounting records when it should have added only $156. In other words it added $9 too much to its Cash balance. As a result the company must subtract $9 from its Cash balance.

Increase by $9

Wrong.
The company added $165 to its accounting records when it should have added only $156. In other words it added $9 too much to its Cash balance. As a result the company must subtract $9 from its Cash balance.

None needed

Wrong.
The company added $165 to its accounting records when it should have added only $156. In other words it added $9 too much to its Cash balance. As a result the company must subtract $9 from its Cash balance.
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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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