What is bank reconciliation?
a) A process to verify the accuracy of the bank’s financial statements
b) A process to reconcile differences between the bank statement and the company’s records
c) A process to calculate interest on a bank loan
d) A process to reconcile interbank transfers
Answer: b) A process to reconcile differences between the bank statement and the company’s records.
What is the purpose of bank reconciliation?
a) To detect errors made by the bank
b) To detect errors made by the company
c) To ensure the accuracy of both the bank statement and the company’s records
d) To reconcile differences between two different bank accounts
Answer: c) To ensure the accuracy of both the bank statement and the company’s records.
Which of the following items would be added to the bank balance during bank reconciliation?
a) Outstanding checks
b) Bank service charges
c) Deposits in transit
d) Bank errors
Answer: c) Deposits in transit.
Which of the following items would be subtracted from the company’s balance during bank reconciliation?
a) Outstanding checks
b) Bank service charges
c) Deposits in transit
d) Bank errors
Answer: a) Outstanding checks.
If a check issued by the company is recorded as $500 in the company’s records but cleared by the bank as $550, what would be the necessary adjustment during bank reconciliation?
a) Add $50 to the company’s balance
b) Deduct $50 from the company’s balance
c) Deduct $550 from the company’s balance
d) No adjustment is required
Answer: b) Deduct $50 from the company’s balance.
What is the purpose of preparing a bank reconciliation statement?
a) To identify errors in the company’s records
b) To identify errors in the bank’s records
c) To reconcile differences between the bank statement and the company’s records
d) To calculate interest on loans and deposits
Answer: c) To reconcile differences between the bank statement and the company’s records.
Which of the following items is not usually found on a bank statement?
a) Bank service charges
b) Deposits made by the company
c) Interest earned on deposits
d) Outstanding checks
Answer: d) Outstanding checks.
True or False: Bank reconciliation is a one-time process and does not need to be done regularly.
a) True
b) False
Answer: b) False.
Which of the following items would not be included in the adjusted bank balance on a bank reconciliation statement?
a) Deposits in transit
b) Outstanding checks
c) Bank service charges
d) Interest earned on deposits
Answer: d) Interest earned on deposits.
True or False: Bank reconciliation helps detect fraudulent activities and unauthorized transactions.
a) True
b) False
Answer: a) True.
When reconciling the bank statement with the company’s records, the adjusted bank balance should equal:
a) The ending balance on the bank statement
b) The ending balance on the company’s records
c) The sum of the adjusted book balance and outstanding checks
d) The sum of the adjusted book balance and deposits in transit
Answer: b) The ending balance on the company’s records.
Which of the following errors would require an adjustment on the bank reconciliation statement?
a) Recording a deposit twice in the company’s records
b) Bank processing fees charged by the company’s bank
c) Bank errors made in recording transactions
d) Overdrawing the company’s bank account
Answer: a) Recording a deposit twice in the company’s records.
In a bank reconciliation, if the adjusted bank balance is greater than the adjusted book balance, it means that:
a) There are more outstanding checks than deposits in transit
b) The company has more cash than what is recorded in its records
c) There are more deposits in transit than outstanding checks
d) There are errors in both the bank statement and the company’s records
Answer: b) The company has more cash than what is recorded in its records.
Which of the following reconciling items would result in an adjustment to the company’s balance?
a) Bank errors
b) Bank service charges
c) Deposits in transit
d) Cleared checks
Answer: a) Bank errors.
A company discovers that a customer’s check it deposited was returned by the bank due to insufficient funds. How would this be recorded in the bank reconciliation?
a) Deducted from the adjusted book balance
b) Added to the adjusted book balance
c) No adjustment is required
d) Added to the adjusted bank balance
Answer: a) Deducted from the adjusted book balance.
When reconciling the bank statement, which of the following is compared to the company’s records?
a) The bank’s ending balance
b) The bank’s starting balance
c) The bank’s average balance
d) The bank’s transaction history
Answer: a) The bank’s ending balance.
Which of the following is not a common timing difference that causes a discrepancy between the bank statement and the company’s records?
a) Deposits in transit
b) Outstanding checks
c) Bank errors
d) Bank service charges
Answer: c) Bank errors.
True or False: The bank reconciliation process is only relevant for businesses and not for individuals.
a) True
b) False
Answer: b) False.