AFC Bank Reconciliation Flashcards
6 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AFC Bank Reconciliation flashcards as text
What is the primary purpose of preparing a bank reconciliation?
Answer: To identify and explain differences between the bank statement balance and the book balance
A bank reconciliation compares the company's cash book balance with the bank statement balance to ensure accuracy and catch errors or unrecorded items.
A deposit in transit is best described as:
Answer: A deposit recorded by the company but not yet by the bank
Deposits in transit are amounts the company has recorded in its books but that have not yet appeared on the bank statement.
On a bank reconciliation, outstanding checks are:
Answer: Deducted from the bank balance
Outstanding checks have been recorded in the company's books but have not yet cleared the bank, so they are subtracted from the bank statement balance.
A bank service charge of $25 appears on the bank statement but has not been recorded in the company's books. How is this handled in the bank reconciliation?
Answer: Deduct $25 from the book balance
Bank service charges reduce cash; since the company hasn't recorded them yet, they must be deducted from the book balance to reconcile.
Interest earned on a checking account appears on the bank statement but has not been recorded by the company. This item should be:
Answer: Added to the book balance
Interest earned increases cash and appears on the bank statement first; it must be added to the book balance since the company hasn't recorded it yet.
After completing a bank reconciliation, journal entries are required for items that adjust:
Answer: The book balance only
Only adjustments to the book (company ledger) balance require journal entries; bank-side differences are corrected by the bank when items clear.