AFC AFC Bank Reconciliation

Question 1

What is the primary purpose of preparing a bank reconciliation?

Accepted Answer

To identify and explain differences between the bank statement balance and the book balance

Answer

To increase the cash balance in the ledger

Answer

To record interest earned automatically

Answer

To eliminate all outstanding checks

Question 2

A deposit in transit is best described as:

Accepted Answer

A deposit recorded by the company but not yet by the bank

Answer

A deposit recorded by the bank but not yet by the company

Answer

An electronic funds transfer pending approval

Answer

A deposit held by the bank as collateral

Question 3

On a bank reconciliation, outstanding checks are:

Accepted Answer

Deducted from the bank balance

Answer

Added to the bank balance

Answer

Added to the book balance

Answer

Deducted from the book balance

Question 4

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?

Accepted Answer

Deduct $25 from the book balance

Answer

Add $25 to the bank balance

Answer

Deduct $25 from the bank balance

Answer

Add $25 to the book balance

Question 5

Interest earned on a checking account appears on the bank statement but has not been recorded by the company. This item should be:

Accepted Answer

Added to the book balance

Answer

Deducted from the bank balance

Answer

Added to the bank balance

Answer

Deducted from the book balance

Question 6

After completing a bank reconciliation, journal entries are required for items that adjust:

Accepted Answer

The book balance only

Answer

The bank balance only

Answer

Both the bank balance and the book balance

Answer

Neither balance, only a memo is needed