Bank Reconciliation Quiz
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Questions and Answers

What type of income is a citizen of the Philippines taxed on?

  • Only income earned outside the Philippines
  • All income earned both inside and outside the Philippines (correct)
  • Income earned from foreign investments
  • Only income earned within the Philippines

    • What income is a non-resident citizen liable for tax on?

  • Income earned only in the Philippines (correct)
  • Only income from investments outside the Philippines
  • Income from gifts received within the Philippines
  • All income earned, both domestic and foreign

    • How are foreign corporations taxed in the Philippines?

  • On income earned from foreign assets
  • Only on income from services provided outside the Philippines
  • On all income earned worldwide
  • Only on income derived inside the Philippines (correct)

    • Which statement about Overseas Filipino Workers (OFWs) is correct regarding their taxation?

    <p>They are only taxed on income earned in the Philippines</p> Signup and view all the answers

    What is the tax liability for domestic corporations in the Philippines?

    <p>Taxed on all income from both local and international sources</p> Signup and view all the answers

    What is the primary purpose of bank reconciliation?

    <p>To match accounting records with bank statements</p> Signup and view all the answers

    What does the acronym NSF stand for in banking?

    <p>Not Sufficient Funds</p> Signup and view all the answers

    Where is the account summary located on a bank statement?

    <p>At the top of the first page</p> Signup and view all the answers

    What does the term 'book balance' refer to?

    <p>The balance in a company's accounting records</p> Signup and view all the answers

    What fee may an entity incur when cashing a NSF check?

    <p>Processing Fee</p> Signup and view all the answers

    What is typically included in the transaction detail of a bank statement?

    <p>A list of withdrawals and deposits</p> Signup and view all the answers

    What is denoted as the 'bank balance'?

    <p>The ending balance on the bank statement</p> Signup and view all the answers

    Why may an entity be charged a fee when issuing an NSF check?

    <p>Lack of available funds in their account</p> Signup and view all the answers

    What types of income are considered compensation for services according to the National Internal Revenue Code?

    <p>Fees, salaries, and commissions</p> Signup and view all the answers

    Which of the following is subject to a 20% final withholding tax?

    <p>Interest income</p> Signup and view all the answers

    What is the capital gains tax rate for individuals selling land and buildings not used in business?

    <p>6%</p> Signup and view all the answers

    Which type of income is generally NOT subject to 20% final withholding tax?

    <p>Royalties from literary works</p> Signup and view all the answers

    Which of the following is exempt from final withholding tax for corporations?

    <p>Dividends</p> Signup and view all the answers

    What must be deducted from gross income to compute taxable income?

    <p>Personal and additional exemptions</p> Signup and view all the answers

    Which income type is derived from the conduct of trade or business?

    <p>Gross income from business activities</p> Signup and view all the answers

    Prizes and winnings are generally subject to which type of tax withholding?

    <p>20% final withholding tax</p> Signup and view all the answers

    What does the book balance refer to?

    <p>The balance shown in the company’s general ledger for the bank account.</p> Signup and view all the answers

    What is a deposit in transit?

    <p>Cash or checks received and recorded by an entity but not yet appearing in the bank records.</p> Signup and view all the answers

    Which of the following describes an outstanding check?

    <p>A check payment recorded by the issuer that has not cleared the bank.</p> Signup and view all the answers

    Why do companies prepare bank reconciliation statements?

    <p>To compare the bank balance per accounting records with the bank statement balance.</p> Signup and view all the answers

    What must a company do if it records a deposit incorrectly?

    <p>Adjust its book balance to correct the error.</p> Signup and view all the answers

    What is a common reason for differences between a company's bank balance and its book balance?

    <p>Timing differences due to outstanding checks and deposits in transit.</p> Signup and view all the answers

    What fee might be included in the book balance?

    <p>Fees for supplying check stock to the company.</p> Signup and view all the answers

    What is NOT a reason why bank reconciliation statements are important?

    <p>To help in budgeting for future expenses.</p> Signup and view all the answers

    What is the Adjusted Method in bank reconciliation?

    <p>Separately determining the bank and book balances.</p> Signup and view all the answers

    Which method of bank reconciliation adjusts the book balance?

    <p>Book to Bank Method</p> Signup and view all the answers

    What do outstanding checks refer to?

    <p>Checks issued but not yet cleared by the bank.</p> Signup and view all the answers

    Which of the following items may lead to timing differences in bank reconciliation?

    <p>Outstanding checks and deposits in transit.</p> Signup and view all the answers

    What is the purpose of bank reconciliation?

    <p>To ensure the book balance and bank balance match.</p> Signup and view all the answers

    What is the maximum income level that won't be taxed under the proposed changes?

    <p>₱250,000</p> Signup and view all the answers

    What will happen to the tax rate for the wealthiest 0.1% under the new tax reform?

    <p>It will increase to 35%.</p> Signup and view all the answers

    What form do individuals earning compensation income need to file for their income tax returns?

    <p>BIR Form 1700</p> Signup and view all the answers

    What does BIR Form 2316 represent?

    <p>A statement of income tax withheld</p> Signup and view all the answers

    What is the maximum personal exemption allowed for individual taxpayers?

    <p>₱ 50,000</p> Signup and view all the answers

    How much additional exemption is allowed for each qualified dependent, up to a maximum of four dependents?

    <p>₱ 25,000</p> Signup and view all the answers

    How does the Philippine individual income tax system operate?

    <p>Progressive tax rate based on income</p> Signup and view all the answers

    What form do business owners organized as sole proprietorships need to file?

    <p>BIR Form 1701</p> Signup and view all the answers

    What is the method called when employers withhold income tax from employees and remit these sums to the BIR?

    <p>Substituted filing</p> Signup and view all the answers

    Who is considered an individual taxpayer when it comes to business income?

    <p>The owner of the business</p> Signup and view all the answers

    Study Notes

    Bank Reconciliation

    • Bank reconciliation is the process of matching a company's book balance to its bank statement balance.
    • This is done to identify any discrepancies between the two balances.
    • The goal is to ascertain any differences and record them appropriately.
    • Two parts of a bank statement:
      • Account Summary: Shows the opening balance, deposits, credits, interest, withdrawals, and closing balance.
      • Transaction Detail: Shows the bank balance (ending balance on the statement), book balance (balance in the company's records), deposits in transit (deposits recorded by the company but not by the bank), outstanding checks (checks issued by the company but not yet cashed by the recipient), and other adjustments.
    • Bank Balance: The ending balance on the bank statement for the month.
    • Book Balance/Cash Ledger: The amount in the company's general ledger for the bank account. This is also known as the balance per books.
    • Deposit in Transit: Cash or checks received and recorded by the company but not yet recorded by the bank.
    • Outstanding Check: A check issued by the company but not yet cleared by the bank.
    • Insufficient Funds Check (NSF): A check that is not honored by the bank because of insufficient funds.
    • Book Balance: The balance shown in the company's accounting records for the account.
    • Interest Earned: Interest earned by the company and recorded on the bank statement.
    • Service Charges: Charges imposed by the bank for services.
    • Adjustment to Deposits: Incorrect deposits or checks with insufficient funds that the bank has identified.
    • Nature of Bank Reconciliation: Bank balances often differ because of timing differences (transactions recorded at different times by the company and the bank), and errors. A bank reconciliation statement compares the bank balance to the book balance.

    Tax Computation

    • TRAIN Law: Aims to simplify, make tax more fair and effective.

    • Tax Reform (TRAIN): Designed to increase funds for infrastructure and social services, reduce poverty and income inequality.

    • Tax benefits: Exemption on the first ₱250,000 of annual income. Tax rates increase for the wealthiest 0.1%.

    • Bonus and other benefits: ₱90,000 or greater amounts of bonus and benefits are tax-exempt.

    • Taxable income calculations: Overtime, absences, leaves, de minimis benefits are not included. Income of zero for people or spouses without jobs.

    • Withholding tax tables: (see specific table given in text for exact rates) provide tax rates based on income brackets.

    • Taxpayers: Citizens living in the Philippines are taxed on all income (domestic or foreign). Non-resident citizens are taxed only on income earned in the Philippines.

    • Source of income (NIRC): Compensation for services, profits from trade or business, gains from property dealings, interests, rents, royalties, dividends.

    • Principal Tax Law: National Internal Revenue Code of 1997.

    • Implementing agency: Bureau of Internal Revenue (BIR).

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    Related Documents

    FABM 2 2nd Quarter Exam - Bank Reconciliation - PDF

    Description

    Test your understanding of the bank reconciliation process, including how to match a company's book balance with its bank statement balance. This quiz covers essential terms such as bank balance, book balance, deposits in transit, and outstanding checks. Dive in to identify discrepancies effectively!

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