Accounting Chapter 5 Flashcards

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Questions and Answers

What is a statement that guides the ethical behavior of a company and its employees?

code of conduct

What is a bank account from which payments can be ordered by a depositor?

checking account

What is a signature or stamp on the back of a check that transfers ownership?

endorsement

What type of endorsement consists only of the endorser's signature?

<p>blank endorsement</p> Signup and view all the answers

What type of endorsement indicates a new owner of a check?

<p>special endorsement</p> Signup and view all the answers

What type of endorsement restricts further transfer of a check's ownership?

<p>restrictive endorsement</p> Signup and view all the answers

What is a check with a future date on it called?

<p>postdated check</p> Signup and view all the answers

What is a computerized cash payments system that transfers funds without the use of checks or currency?

<p>electronic funds transfer</p> Signup and view all the answers

What is a check that a bank refuses to pay called?

<p>dishonored check</p> Signup and view all the answers

What is a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder?

<p>debit card</p> Signup and view all the answers

What is an amount of cash kept on hand and used for making small payments?

<p>petty cash</p> Signup and view all the answers

What is a form showing proof of a petty cash payment?

<p>petty cash slip</p> Signup and view all the answers

Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less.

<p>False (B)</p> Signup and view all the answers

When a deposit is made in a bank account, the bank issues a receipt.

<p>True (A)</p> Signup and view all the answers

There are four types of endorsements commonly used: blank, special, original, and restrictive.

<p>False (B)</p> Signup and view all the answers

A check with a blank endorsement can be cashed by anyone who has possession of the check.

<p>True (A)</p> Signup and view all the answers

When writing a check, the first step is to prepare the check stub.

<p>True (A)</p> Signup and view all the answers

Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime.

<p>False (B)</p> Signup and view all the answers

The amount of a check is written twice on each check.

<p>True (A)</p> Signup and view all the answers

A check that contains errors must be marked with the word VOID and another check must be written.

<p>True (A)</p> Signup and view all the answers

An important aspect of cash control is verifying that the information on a bank statement and a checkbook are in agreement.

<p>True (A)</p> Signup and view all the answers

An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.

<p>True (A)</p> Signup and view all the answers

Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount.

<p>True (A)</p> Signup and view all the answers

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.

<p>True (A)</p> Signup and view all the answers

The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.

<p>False (B)</p> Signup and view all the answers

The source document for an electronic funds transfer is a memorandum.

<p>True (A)</p> Signup and view all the answers

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Study Notes

Ethical Guidelines

  • Code of Conduct: A statement guiding ethical behavior within a company and its employees.

Banking Basics

  • Checking Account: A bank account allowing deposits and withdrawals, from which payments can be ordered.
  • Endorsement: A signature or stamp on the back of a check that signifies ownership transfer.

Types of Endorsements

  • Blank Endorsement: An endorsement that contains only the endorser's signature.
  • Special Endorsement: Designates a new owner of a check.
  • Restrictive Endorsement: Limits further transfer of ownership of a check.

Check Characteristics

  • Postdated Check: A check issued with a future date.
  • Dishonored Check: A check that a bank refuses to pay.

Payment Systems

  • Electronic Funds Transfer (EFT): A computerized system for transferring funds without checks or currency.
  • Debit Card: A bank card that deducts purchase amounts directly from the cardholder's checking account.

Cash Management

  • Petty Cash: Cash kept on hand for small expenses.
  • Petty Cash Slip: A document proving a petty cash payment.

True or False Concepts

  • Recording errors for cash transactions are more likely due to their frequency (False).
  • A receipt is issued by a bank for deposited funds (True).
  • Common endorsement types include blank, special, and restrictive only; original is not a standard type (False).
  • A blank endorsed check can be cashed by anyone possessing it (True).
  • The initial step in writing a check is preparing the check stub (True).
  • Banks can withdraw money from accounts without regard to the check's written date (False).
  • The amount on a check is typically written twice (True).
  • Checks with errors must be marked as VOID and replaced (True).
  • Important cash control requires agreement between bank statement information and checkbook records (True).
  • Outstanding checks are issued but not yet appeared on the bank statement (True).
  • Banks deduct service charges without a check being written by customers (True).
  • Fees apply for dishonored checks, and banks deduct the amount from accounts (True).
  • Journal entries for EFT payments differ from those made by check (False).
  • The source document for an EFT is a memorandum (True).

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