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The MCQs below are drawn from the Accountancy & Auditing subject category.
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4271
Which of the following errors causes a discrepancy in the cash book balance that requires adjustment?
Bank charges are deducted by the bank directly from the account. If the business has not recorded these in its cash book, the cash book balance will differ from the bank statement, necessitating an adjustment entry in the cash book.
4272
Which of the following items does not typically cause a discrepancy between the bank statement and the cash book after the cash book has been updated for known bank transactions?
Credit transfers are usually identified on the bank statement and recorded in the cash book during the update process. Conversely, uncredited lodgments and unpresented cheques are timing differences that remain outstanding even after the cash book is updated, causing a persistent reconciliation difference.
4273
How should bank charges of $5,000 that were omitted from the cash book be recorded?
Bank charges represent an expense to the business and a reduction in the bank balance. In the cash book, which follows the bank's perspective, a decrease in the bank balance is recorded on the credit side. Therefore, the charges must be credited to the cash book to accurately reflect the reduction in funds.
4274
What is the accounting term for cheques that have been issued by a business but have not yet been presented to the bank for payment?
Unpresented cheques, also known as outstanding cheques, are those that the business has recorded in its cash book as a payment, but the bank has not yet processed because the payee has not deposited them. This creates a timing difference between the cash book balance and the bank statement balance, requiring reconciliation.
4275
A company entered into a hire purchase agreement requiring monthly payments of $1,000. Three payments were processed through the bank, but these transactions were omitted from the cash book. What is the necessary adjustment to the cash book?
Since the payments were made via the bank but not recorded in the cash book, the cash book balance is currently overstated. To reconcile the records, the total amount of the three payments ($1,000 x 3 = $3,000) must be subtracted from the cash book balance to reflect the actual cash outflow.
4276
What is the accounting term for checks that have been deposited by a business but not yet processed by the bank?
Uncredited checks, often called deposits in transit, are amounts deposited into a bank account that have not yet been cleared or credited by the bank at the time the bank statement is prepared. This creates a timing difference between the business's cash book and the bank's records.
4277
Which of the following items does not cause a discrepancy between the cash book balance and the bank pass book balance?
A bank reconciliation statement is prepared to identify differences between the cash book and the pass book. Cheques that have been deposited and successfully cleared by the bank will be recorded in both the cash book and the pass book, thus they do not cause a discrepancy. Discrepancies arise from timing differences or errors that affect only one of the two records.
4278
What term describes checks issued by a business that have not yet been presented to the bank for payment?
Outstanding checks are payments issued by a business that have been recorded in the company's cash book but have not yet been processed or cleared by the bank. These create a temporary discrepancy between the cash book balance and the bank statement balance, which is a common reconciling item in a Bank Reconciliation Statement.
4279
What is the alternative term used to describe unpresented checks?
Unpresented checks are checks that have been issued by a business to a payee but have not yet been presented to the bank for payment. Because these checks remain outstanding in the records of the business while waiting for the payee to cash them, they are commonly referred to as outstanding checks in accounting and banking terminology.
4280
What is another common term used for unpresented cheques?
An unpresented cheque, also known as an outstanding cheque, is a payment instrument issued by a business and recorded in its internal cash book, but which has not yet been processed or cleared by the bank. Because the bank has not yet deducted the amount from the company's account, a discrepancy arises between the cash book balance and the bank statement balance, necessitating reconciliation.
