Podcast
Questions and Answers
What is a bank statement?
What is a bank statement?
- A document showing only withdrawals
- A legal document for loans
- A report of deposits, withdrawals, and balances (correct)
- A type of endorsement
What defines a blank endorsement?
What defines a blank endorsement?
- A legal contract
- An endorsement with multiple signatures
- An endorsement consisting only of the endorser's signature (correct)
- An endorsement that is not signed
What is a checking account?
What is a checking account?
- An account meant for long-term savings
- A bank account from which payments can be ordered by a depositor (correct)
- A type of investment account
- An account for savings
What does a code of conduct provide?
What does a code of conduct provide?
What is a debit card?
What is a debit card?
What is a dishonored check?
What is a dishonored check?
What is an electronic funds transfer?
What is an electronic funds transfer?
What is the purpose of an endorsement on a check?
What is the purpose of an endorsement on a check?
What is petty cash?
What is petty cash?
What is a postdated check?
What is a postdated check?
Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less.
Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less.
When making a deposit in a bank account, the bank issues a receipt.
When making a deposit in a bank account, the bank issues a receipt.
There are 4 types of endorsements commonly used: bank, special, original, and restrictive.
There are 4 types of endorsements commonly used: bank, special, original, and restrictive.
A check with a bank endorsement can be cashed by anyone who has possession of the check.
A check with a bank endorsement can be cashed by anyone who has possession of the check.
When writing a check, the first step is to prepare the check stub.
When writing a check, the first step is to prepare the check stub.
Most banks do not look at the date the check is written and will draw money from the depositor's account at any time.
Most banks do not look at the date the check is written and will draw money from the depositor's account at any time.
The amount of a check is written twice on each check.
The amount of a check is written twice on each check.
A check that contains errors must be marked with the word VOID, and another check must be written.
A check that contains errors must be marked with the word VOID, and another check must be written.
An important aspect of cash control is verifying that the information on a bank statement and a check are in agreement.
An important aspect of cash control is verifying that the information on a bank statement and a check are in agreement.
An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.
An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.
Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount.
Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount.
Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account as well.
Not only do banks charge a fee for handling a dishonored check, but they also deduct the amount of the check from the account as well.
The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.
The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.
The source document for an electronic funds transfer is a memorandum.
The source document for an electronic funds transfer is a memorandum.
The source document for a debit card purchase is a memorandum.
The source document for a debit card purchase is a memorandum.
Techknow Consulting maintains a petty cash fund for making large cash payments without writing checks.
Techknow Consulting maintains a petty cash fund for making large cash payments without writing checks.
Businesses use petty cash when writing a check is not time or cost effective.
Businesses use petty cash when writing a check is not time or cost effective.
A memorandum is the source document for the entry to record establishing a petty cash fund.
A memorandum is the source document for the entry to record establishing a petty cash fund.
Anytime a payment is made from a petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.
Anytime a payment is made from a petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.
When the petty cash fund is replenished, the balance of the petty cash account increases.
When the petty cash fund is replenished, the balance of the petty cash account increases.
Study Notes
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).
Studying That Suits You
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Description
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.