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 an 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 report of deposits, withdrawals, and bank balances sent to a depositor by a bank?
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What is a check that the bank refuses to pay?
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What is a computerized cash payments system that transfers funds without the use of checks, currency, or other paper documents?
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What is a bank card that, when making purchases, 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 form shows proof of a petty cash payment?
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What should be recorded when a received bank statement shows a bank service charge?
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What should be recorded when a bank sends a notice of a dishonored check from R.Sandell?
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What should be recorded when paying cash on account to Suburban Office Supplies using EFT?
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What should be recorded for purchasing supplies using a debit card?
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What should be recorded when cash is paid to establish a petty cash fund?
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What should be recorded when cash is paid to replenish a petty cash fund: $12.00 for supplies, $3.50 for miscellaneous expense, and $8.50?
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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 so the others will know that it is not to be used.
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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 by a depositor 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 for 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 a check.
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The source document for an electronic funds transfer is a memorandum.
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The source document for a debit card purchase is a memorandum.
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TechKnow Consulting maintains a petty cash fund for making large cash payments without writing checks.
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A memorandum is the source document for the entry to record establishing a petty cash fund.
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Anytime a payment is made from the petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.
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When the petty cash fund is replenished, the balance of the petty cash account increases.
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Study Notes
Ethical Practices in Accounting
- Code of Conduct: A set of guidelines that directs ethical behavior for employees and the organization.
Banking and Accounts
- Checking Account: A bank account that allows depositors to write checks for payments.
- Bank Statement: A report from the bank outlining deposits, withdrawals, and current balance.
- Postdated Check: A check that has a date in the future for payment processing.
Endorsements and Checks
- Endorsement: A signature on the back of a check that transfers ownership.
- Blank Endorsement: Only includes the endorser's signature, allowing anyone to cash the check.
- Special Endorsement: Specifies a new owner for the check.
- Restrictive Endorsement: Limits further transfer of the check's ownership.
- Dishonored Check: A check that the bank refuses to pay.
Cash Transactions
- Electronic Funds Transfer (EFT): A system that transfers funds electronically without physical documents.
- Debit Card: A card that deducts funds directly from the cardholder's checking account for purchases.
- Petty Cash: A small cash reserve used for minor purchases, typically maintained through petty cash slips.
- Petty Cash Slip: A form used to document petty cash transactions.
Accounting Entries
- Recording Bank Charges: Debit Miscellaneous Expense and Credit Cash when a bank charges services.
- Dishonored Check from A/R: Debit Accounts Receivable and Credit Cash to account for a dishonored check.
- Electronic Payment: Journal entries for EFT payments mirror those for checks.
- Establishing Petty Cash Fund: Debit Petty Cash and Credit Cash to set up the fund.
True/False Insights
- Cash transactions are frequent and prone to errors. (False)
- Deposits earn receipts from banks. (True)
- Banks care about check writing dates when processing. (False)
- Checks with errors should be marked "void." (True)
- Outstanding checks are not reported yet by the bank. (True)
- Service charges do not require a written check. (True)
- Source documents for EFT and debit card transactions are memorandums. (True)
- Petty cash is used for large cash payments. (False)
Petty Cash Management
- Petty Cash Replenishing: When the fund is replenished, the petty cash account balance remains unchanged.
- Documentation: Every payment requires a petty cash slip for proof.
These notes summarize key definitions and how to record various transactions in accounting practices, providing a comprehensive review of the essential concepts from the chapter.
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Description
Test your knowledge with this study guide on Accounting Chapter 5. The flashcards cover essential terms and definitions, including ethical guidelines and banking concepts. Perfect for students preparing for exams in accounting.
