Accounting Knowledge practice questions

Cash, bank reconciliation & internal controls

10 practice questions on cash, bank reconciliation & internal controls, each with the answer and why it is right. From Questiva Learning' QuickBooks® Online skills test.

1. When you reconcile, which of these needs an entry in your books?

   1. Deposits in transit.
   2. Checks that haven't cleared yet.
   3. Bank service charges.
   4. An error the bank made.

   Answer: C) Bank service charges.. The bank already took the service charge, but your books won't show it until you enter it. The other three are already right in your books.

2. A check from a closed period will never be cashed. You should:

   1. Delete it.
   2. Reverse it in the current period.
   3. Leave it outstanding.
   4. Void it back in the month it was written.

   Answer: B) Reverse it in the current period.. Reversing it now clears it without changing the closed period. An uncashed check may also have to be reported to the state as unclaimed property.

3. The same person writes the checks and reconciles the bank account. The owner should start by:

   1. Reviewing the bank statements before the bookkeeper does.
   2. Writing a job description for the bookkeeper.
   3. Paying vendors by ACH instead of by check.
   4. Having the bookkeeper reconcile twice a month instead of once.

   Answer: A) Reviewing the bank statements before the bookkeeper does.. Right now nobody else sees what clears the bank. Owner review of the statements, and vacations with someone else covering, are the simplest checks.

4. Customer checks deposited together show as one deposit at the bank. To record them:

   1. Receive each payment, then group them on one deposit.
   2. Receive each payment straight into Checking.
   3. Enter one deposit and reduce Accounts Receivable with a journal entry.
   4. Wait for the bank statement.

   Answer: A) Receive each payment, then group them on one deposit.. Each payment closes its invoice and waits in Undeposited Funds. One deposit then matches the single line on the bank statement.

5. What do you do with a bank feed transaction you already entered as a bill payment?

   1. Add it, then delete your bill payment.
   2. Match it to the bill payment.
   3. Add it and let the reconciliation sort out the duplicate.
   4. Exclude it.

   Answer: B) Match it to the bill payment.. Matching links the bank's line to the payment already in your books, so it's recorded once and marked cleared.

6. A reconciliation's beginning balance can stop matching last month's ending balance when:

   1. Someone adds a new transaction dated last month.
   2. Last month's outstanding checks clear.
   3. A reconciled transaction is deleted or changed.
   4. The bank corrects an error on its side.

   Answer: C) A reconciled transaction is deleted or changed.. The beginning balance is the total of everything already marked reconciled, so it only moves when one of those transactions changes. A new entry dated last month just shows up in this month's list.

7. When a bank reconciliation won't balance, it's best to:

   1. Find the difference before you finish.
   2. Finish it if the difference is only a few cents.
   3. Post an adjustment now and reverse it next month.
   4. Change the beginning balance to match the statement.

   Answer: A) Find the difference before you finish.. Forcing the reconciliation posts the difference to a discrepancy account, and whatever caused it stays in your books.

8. When a card processor keeps its fee from a customer payment, record:

   1. Only the amount deposited.
   2. A surcharge on the invoice.
   3. The full payment and a fee expense.
   4. A discount on the invoice.

   Answer: C) The full payment and a fee expense.. The customer paid the full amount. Record the full payment and the fee as an expense, and the deposit nets to what the bank received.

9. A vendor emails you new bank account details. To confirm them:

   1. Reply to their email.
   2. Check that the email address matches their earlier ones.
   3. Call the number you already have for them.
   4. Accept it if it came from your usual contact.

   Answer: C) Call the number you already have for them.. These requests often come from a hacked or look-alike email account. Confirm by phone, using a number from your own records.

10. Card purchases are entered as expenses when they're made. The monthly card payment from checking is:

    1. Another expense, dated on the statement.
    2. A transfer from checking to the card.
    3. The point when the charges become deductible.
    4. A reduction in checking only.

    Answer: B) A transfer from checking to the card.. The purchases were expensed when they were charged. Paying the card lowers checking and the card balance, so recording it as an expense counts the spending twice.