AFC AFC Bank Reconciliation 1

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

A bank reconciliation compares the company's cash book balance with the bank statement balance to ensure accuracy and catch errors or unrecorded items.

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

Deposits in transit are amounts the company has recorded in its books but that have not yet appeared on the bank statement.

Question 3

On a bank reconciliation, outstanding checks are:

Accepted Answer

Deducted from the bank balance

Answer

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.

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

Bank service charges reduce cash; since the company hasn't recorded them yet, they must be deducted from the book balance to reconcile.

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

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.

AFC - Accounting Fundamentals Certification Practice Test

AFC - Accounting Fundamentals Certification Practice Test

AFC AFC Bank Reconciliation 1