Question

12) Which of the following items used to reconcile cash does not require an adjusting entry?
A) bank service charge
B) interest earned
C) note collected by the bank
D) outstanding cheques

13) All of the following are items that cause a difference between the bank balance and the book balance except:
A) cancelled cheques.
B) deposits in transit.
C) outstanding cheques.
D) NSF cheques.

14) If the bank mistakenly recorded a $71 deposit as $17, the error would be shown on the bank reconciliation as a:
A) $71 addition to the bank balance.
B) $54 addition to the bank balance.
C) $71 deduction from the bank balance.
D) $54 deduction from the bank balance.

15) All of the following are controls over petty cash except:
A) designating one employee to administer the fund.
B) supporting all fund payments with a petty cash ticket.
C) replenishing the fund through normal cash payment procedures.
D) keeping an unlimited amount of cash on hand.

Answer 1

12. Option (D) is correct

Outstanding cheques do not require an adjusting entry. The reason being supplier's account has already been debited when the cheques were issued or sent to him. There is no further entry needed

In other options A,B and C, there will be an adjusting entry needed for bank service charge, interest earned and notes collected by bank, because these are direct debits or credits by bank. An adjusting entry is needed in the books also.

13. Option (A) is correct

Cancelled cheques do not cause a difference between the bank balance and the book balance.

14. Option (B) is correct

There should be deposits of $71 in the bank account.But actual deposits were for $17 only. So, in the reconciliation, $54 should be shown as an addition to the Bank balance.

15 Option (D) is correct

Keeping an unlimited amount of cash on hand is not a control over petty cash.