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?
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What type of endorsement indicates a new owner of a check?
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What type of endorsement restricts further transfer of a check's ownership?
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What is a check with a future date on it called?
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What is a computerized cash payments system that transfers funds without the use of checks or currency?
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What is a check that a bank refuses to pay called?
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What is a bank card that automatically deducts the amount of a purchase from the checking account of the cardholder?
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What is an amount of cash kept on hand and used for making small payments?
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What is a form showing proof of a petty cash payment?
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Because cash transactions occur more frequently than other transactions, the chances for making recording errors affecting cash are less.
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When a deposit is made in a bank account, the bank issues a receipt.
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There are four types of endorsements commonly used: blank, special, original, and restrictive.
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A check with a blank endorsement can be cashed by anyone who has possession of the check.
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When writing a check, the first step is to prepare the check stub.
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Most banks do not look at the date the check is written and will withdraw money from the depositor's account anytime.
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The amount of a check is written twice on each check.
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A check that contains errors must be marked with the word VOID and another check must be written.
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An important aspect of cash control is verifying that the information on a bank statement and a checkbook are in agreement.
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An outstanding check is one that has been issued but not yet reported on a bank statement by the bank.
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Banks deduct service charges from customers' checking accounts without requiring customers to write a check for the amount.
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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.
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The journal entry for a payment on account using electronic funds transfer is exactly the same as when the payment is made by check.
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The source document for an electronic funds transfer is a memorandum.
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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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Test your knowledge of key terms from Accounting Chapter 5 with these flashcards. Each card features a word and its definition to help reinforce your understanding of essential accounting concepts. Perfect for students looking to review before exams.
