Accounting Chapter 5 Flashcards

Banking and Financial Terms

• Bank Statement: A report detailing deposits, withdrawals, and current bank balances provided to the account holder by the bank.
• Blank Endorsement: A simple endorsement on a check consisting solely of the endorser's signature, allowing anyone to cash it.
• Checking Account: A type of bank account that permits the holder to withdraw and deposit funds, enabling easy access to their money.
• Debit Card: A payment card linked directly to the cardholder's checking account, automatically deducting purchase amounts upon transaction.
• Electronic Funds Transfer (EFT): A system for transferring money electronically, bypassing the need for paper checks or cash.

Check Handling and Endorsements

• Dishonored Check: A check that has been rejected by the bank, often due to insufficient funds.
• Endorsement: The signing or stamping on the back of a check, facilitating ownership transfer to a new payee.
• Postdated Check: A check that has a date set in the future, which cannot be cashed until that date.
• Restrictive Endorsement: An endorsement that limits the transferability of a check, often specifying it for deposit only.

Cash Management Practices

• Petty Cash: A small sum of cash kept for minor expenses, used for convenience rather than checks or credit.
• Petty Cash Slip: A document used to record petty cash transactions, serving as proof of payment.
• Outstanding Check: A check that has been issued but hasn't yet cleared or been reported on the bank statement.

Check Writing Guidelines

• Memorandum for EFT: This serves as the source document for recording electronic funds transfers.
• Common Check Errors: A check with mistakes must be labeled "VOID" and a new one issued.

General Principles and Truth Statements

• Cash Control: Important to verify consistency between bank statement information and check records.
• Service Charges: Banks may deduct service fees from accounts without requiring a check from customers.
• Petty Cash Use: Typically utilized for small transactions when writing checks is inefficient.
• Check Validity: Most banks consider the date on checks, and checks are written to indicate amounts clearly.

True/False Key Points

• Frequency of cash transactions increases potential for errors (false).
• Deposits receive bank-issued receipts (true).
• Several types of endorsements exist (false - only three are commonly used: blank, restrictive, and special).
• Banks allow checks with endorsements to be cashed by anyone with possession (true).
• First step in writing a check is preparing the check stub (true).
• Banks may cash checks any time regardless of written date (false).
• Check amounts are noted twice for clarity (true).
• Errors in checks require a new transaction and voiding of the original (true).
• Petty cash fund does not increase upon replenishment (false).

Dive into the essential terms of Chapter 5 in Accounting with these flashcards. Each card provides a key word along with its definition, aiding in the understanding of vital concepts such as bank statements and checking accounts. Perfect for quick study and review before exams.