Accounting Knowledge practice questions

Cash, bank reconciliation & internal controls

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

1. While reconciling the March bank statement you list four reconciling items. Which one requires a journal entry in the company's books?

   1. A $1,500 deposit made on March 31 that the bank shows on April 1.
   2. Check 2208 for $640, written on March 28 and not yet cleared.
   3. A $20 monthly service charge shown on the statement and not yet recorded.
   4. A $540 check that the bank cleared for $450 because it misread the amount.

   Answer: C) A $20 monthly service charge shown on the statement and not yet recorded.. Items the bank knows about but the books do not — service charges, interest, NSF returns — adjust the book balance and need an entry. Deposits in transit and outstanding checks are already in the books; they adjust the bank side and clear on their own. A bank error is corrected by the bank, not by an entry — reconciling items are classified by which side is missing them.

2. The April bank statement ends at $8,200. Deposits in transit are $1,500, outstanding checks total $2,300, and a $15 bank fee on the statement has not been recorded. The book balance before adjustment is $7,415. What is the true cash balance at April 30?

   1. $7,415
   2. $8,200
   3. $9,700
   4. $7,400

   Answer: D) $7,400. Adjusted bank balance: $8,200 + $1,500 in transit − $2,300 outstanding = $7,400. Adjusted book balance: $7,415 − $15 fee = $7,400. The two sides agree, which is the point of the reconciliation. The statement balance alone ignores timing items, and the unadjusted book balance still carries the fee the bank has already taken — both sides are adjusted to the same true cash figure.

3. The May bank statement shows a $300 customer check returned NSF. On the bank reconciliation, where does this item belong, and what entry does it require?

   1. Added to the bank balance as a deposit in transit; no entry is needed until the customer pays again.
   2. Deducted from the bank balance as an outstanding item; Debit Cash 300 / Credit Accounts Receivable 300.
   3. Deducted from the book balance; Debit Bad Debt Expense 300 / Credit Cash 300.
   4. Deducted from the book balance; Debit Accounts Receivable 300 / Credit Cash 300.

   Answer: D) Deducted from the book balance; Debit Accounts Receivable 300 / Credit Cash 300.. The bank has already taken the $300 back, so the books are the side that is behind: deduct it from the book balance and record it. The customer owes the money again, so the debit goes to A/R, not Bad Debt Expense — it is unpaid, not uncollectible. Treating it as a bank-side item leaves the books showing cash the company no longer has — book-side items need entries.

4. Check 2210 to a supplier was written for $486 but recorded in the books as $468. The bank cleared it at $486, and the reconciliation is out by $18. What is the correct fix?

   1. Call the bank to reverse the $18 overcharge, since the books show $468 and the bank must pay what was recorded.
   2. Correct the check in the books to $486, with an extra $18 Debit to expense and Credit to Cash. The bank is right.
   3. Record an $18 outstanding check so the bank side agrees this month, and let it clear next month.
   4. Reduce the statement ending balance by $18 so the Difference is zero, then finish the reconciliation.

   Answer: B) Correct the check in the books to $486, with an extra $18 Debit to expense and Credit to Cash. The bank is right.. The bank paid what the check said, $486. The books recorded a transposition ($468), a difference divisible by 9. The books are wrong, so record an $18 entry bringing the check to its real amount. An invented outstanding check or edited statement balance hides the error.

5. A $2,000 cash deposit made at 6 p.m. on March 31 is recorded in the books on March 31 but appears on the April bank statement. On the March bank reconciliation, what is this item?

   1. A deposit in transit: added to the bank balance, with no entry in the books.
   2. An outstanding check: deducted from the bank balance, with no entry in the books.
   3. A book error: the deposit must be moved to April with a journal entry.
   4. A bank error: the bank must be asked to re-date the deposit to March.

   Answer: A) A deposit in transit: added to the bank balance, with no entry in the books.. The books already have the deposit; the bank simply had not processed it by the statement date. That is the definition of a deposit in transit — a timing item added to the bank balance so it catches up with the books. No entry is needed and nothing is wrong; it will appear on April's statement — timing differences are reconciled, not corrected.

6. Check 1180 for $900, written 14 months ago to a former contractor, has never cleared and appears as outstanding on every monthly reconciliation. What should you do?

   1. Delete the check from the books so it stops appearing on the outstanding list, and re-enter it only if the contractor ever turns up asking about it.
   2. Contact the payee; if it will never be cashed, reverse it in the current period, and note that an uncashed check may be unclaimed property.
   3. Leave it on the list — an outstanding check is a normal reconciling item, and it will simply drop off once the contractor deposits it.
   4. Record a $900 deposit to Other Income dated today, since the money stayed in the bank and the contractor has not claimed it in over a year.

   Answer: B) Contact the payee; if it will never be cashed, reverse it in the current period, and note that an uncashed check may be unclaimed property.. A check that will never clear is no longer a reconciling item; it is an obligation never settled. Reverse it in the current period so cash and the original account are corrected without reopening a closed year, and remember an uncashed check may be unclaimed property under state law. Deleting it erases the audit trail; calling it income misstates what happened — stale items are resolved, not carried.

7. A $200 imprest petty cash fund is replenished at month end. The box holds $38 in cash and receipts for office supplies ($90) and postage ($72). What is the replenishment entry?

   1. Debit Petty Cash 162 / Credit Cash (checking) 162, to restore the fund to $200
   2. Debit Office Supplies 90, Debit Postage 72 / Credit Petty Cash 162
   3. Debit Office Supplies 90, Debit Postage 72 / Credit Cash (checking) 162
   4. Debit Cash (checking) 162 / Credit Petty Cash 162, to record the cash removed

   Answer: C) Debit Office Supplies 90, Debit Postage 72 / Credit Cash (checking) 162. Under the imprest system the Petty Cash account stays fixed at $200; it is only touched when the fund is created or its size changes. Replenishment records the expenses the receipts show and credits the checking account for the check that refills the box. Debiting or crediting Petty Cash at replenishment would make the fund balance drift away from the $200 actually authorised — the imprest system.

8. In a three-person office, Dana opens the mail and lists the checks, Maria posts customer payments and prepares the deposit, and Sam signs checks and reviews the bank statement. Which change would most weaken internal control?

   1. Sam compares Dana's list of checks to the deposit slip each week before the deposit goes to the bank.
   2. Dana also lists the invoices each check pays, so Maria can apply the payments correctly.
   3. While Dana is on leave, Maria opens the mail, posts the payments and prepares the deposit herself.
   4. The bank statement goes to Sam instead of Maria, and Sam reviews it before anyone reconciles.

   Answer: C) While Dana is on leave, Maria opens the mail, posts the payments and prepares the deposit herself.. Segregation of duties means no one person both handles cash and records it. If Maria receives the checks, posts them and makes the deposit, she could divert a check and cover it with a later payment. The other changes add checks, such as comparing the mail list to the deposit.

9. A small business has one bookkeeper who records cash receipts and prepares checks. Who should perform the monthly bank reconciliation?

   1. The bookkeeper, because she knows every transaction and can finish the reconciliation faster than anyone.
   2. Whoever has time that month, since the reconciliation is a clerical task that any staff member can do.
   3. The person who signs the checks, because they have already seen and approved every payment that went out.
   4. Someone who neither records receipts nor prepares checks — the owner or an outside accountant.

   Answer: D) Someone who neither records receipts nor prepares checks — the owner or an outside accountant.. The reconciliation is the control that catches what the bookkeeper did, so it cannot be done by the bookkeeper. An independent person — the owner, a manager, or the outside accountant — compares what the bank says to what the books say. The check signer is better than the bookkeeper but is still inside the payment process; independence is what gives the reconciliation its value — segregation of duties.

10. Reviewing vendor files, you see four situations. Which is the strongest red flag for a fictitious-vendor scheme?

    1. A vendor set up last quarter with an employee's home address and invoices all just under the $1,000 approval limit.
    2. A long-standing vendor whose invoices come in the same amount on the same day each month, approved by the same manager.
    3. A vendor that offers 2/10 net 30 terms and sends a monthly statement listing every open invoice.
    4. A vendor that emails PDF invoices instead of mailing them, each with the company's purchase-order number.

    Answer: A) A vendor set up last quarter with an employee's home address and invoices all just under the $1,000 approval limit.. A new vendor with an employee's address and invoices just under the approval limit fits a shell-vendor scheme: the employee bills the company and approves the invoices. Fixed monthly amounts, discount terms and emailed PDFs are ordinary.

11. An owner tells you: 'Our bookkeeper is wonderful. She writes all the checks, reconciles the bank account, the statements go straight to her, and she hasn't taken a vacation in four years.' Which control should be added first?

    1. Route the bank statement to the owner to review the check images before she reconciles, and require her to take vacation with cover.
    2. Give the bookkeeper a raise and a written job description so that her responsibilities, and the trust placed in her, are documented.
    3. Switch every vendor payment from checks to ACH transfers so there are no paper checks that she could alter, forge or write to herself.
    4. Ask the bookkeeper to reconcile twice a month instead of once, so that any error or missing item is found within two weeks rather than four.

    Answer: A) Route the bank statement to the owner to review the check images before she reconciles, and require her to take vacation with cover.. One person writes the checks, is the only one who sees what cleared, and never leaves long enough for anyone else to look — every condition for undetected embezzlement. The cheapest fix is owner review of the unopened statement and mandatory vacation. More frequent reconciliations by the same person add nothing; ACH moves the risk rather than adding oversight — controls must be independent of the person controlled.

12. The audit trail shows the bookkeeper voided 11 customer payments totaling $4,300 over three months, and on each of those days recorded a smaller cash sale from the same customer. What does this most likely indicate?

    1. Routine correction of posting errors. Voiding and re-entering a payment at the right amount is how a mistake gets fixed.
    2. Possible skimming. Payments were removed after receipt and partly re-entered. Compare voided receipts with bank deposits and remittances.
    3. The customers short-paid, and the bookkeeper recorded what arrived, voiding the originals to keep the aging accurate.
    4. A software defect that duplicates payments, so the bookkeeper has to void them. Report it to the vendor's support.

    Answer: B) Possible skimming. Payments were removed after receipt and partly re-entered. Compare voided receipts with bank deposits and remittances.. A repeated void followed by a smaller re-entry for the same customer points to skimming. The full payment arrived, the record was removed, and a smaller amount was booked. Real corrections are occasional and net to the same total. Check deposits and customer records.

13. Which control stops the bank from paying a forged or altered check, instead of catching it afterward?

    1. Requiring two authorized signatures on every check over $5,000 before it leaves the office.
    2. Doing the bank reconciliation within ten days of the statement date every month.
    3. Positive pay, where the bank pays only checks that match the company's issued-check list.
    4. Keeping blank check stock in a locked cabinet with a log of every check number issued.

    Answer: C) Positive pay, where the bank pays only checks that match the company's issued-check list.. With positive pay, the bank compares each presented check to the company's issued list (number, payee, amount) and refuses mismatches, stopping a forged or altered item before it clears. Dual signatures and locked stock control what leaves the office. Reconciliation finds it afterward.

14. A client on the cash basis shows a strong March profit. You know that $20,000 of the month's receipts were collections of January invoices, and that $9,000 of March vendor bills are still unpaid. What is the cash-basis P&L hiding?

    1. Nothing; the cash basis is the more accurate picture of March because it shows only the money that actually moved during the month.
    2. March looks better than it was: $20,000 of January's revenue landed in March, and $9,000 of March costs are missing until paid.
    3. March profit is understated, because the cash basis leaves out the $9,000 of bills and the $20,000 of collections alike.
    4. The client owes sales tax on the $20,000 collected in March, which the cash-basis report does not track or show anywhere.

    Answer: B) March looks better than it was: $20,000 of January's revenue landed in March, and $9,000 of March costs are missing until paid.. Cash-basis reports record revenue when collected and expenses when paid, so March is taking credit for January's work and postponing its own costs. An accrual P&L would move the $20,000 back to January and bring the $9,000 into March, showing a much thinner month. The cash basis is simpler, not more accurate, for judging a period's performance — the matching principle.

15. A bookkeeper receives three customer checks on June 8, for $420, $1,150 and $680, and takes them to the bank in one trip. The bank will show a single $2,250 deposit. How should the receipts be recorded so one register line matches the deposit and each invoice still closes?

    1. Record each payment against its invoice into Undeposited Funds, then make one $2,250 bank deposit that clears it.
    2. Record all three payments straight into checking on June 8, so each payment has its own register line.
    3. Record one $2,250 deposit to checking and reduce A/R for the total with a journal entry.
    4. Wait for the statement, record one $2,250 deposit on the date the bank posted it, and leave the invoices open until then.

    Answer: A) Record each payment against its invoice into Undeposited Funds, then make one $2,250 bank deposit that clears it.. The bank records the batch as one deposit. Routing payments through Undeposited Funds closes each invoice and gives one $2,250 deposit line to match. Straight to checking leaves three register lines, a journal entry to A/R leaves invoices open, and waiting only delays.

16. The bank feed downloads a $312 payment to City Utilities that Priya already entered three days ago as a bill payment. What should she do with the downloaded transaction?

    1. Add it as a new transaction, then delete her bill payment, because the downloaded copy carries the bank's own date and amount.
    2. Match it to the bill payment already in the register, so one transaction is marked cleared instead of two being recorded.
    3. Add it as a new expense to City Utilities and let the reconciliation show which of the two entries is the duplicate to remove.
    4. Exclude it from the feed, since the payment is already in the books and the downloaded copy is not needed for anything.

    Answer: B) Match it to the bill payment already in the register, so one transaction is marked cleared instead of two being recorded.. Matching links the downloaded line to the entry already in the books and marks it cleared, so the payment is recorded once and the bill stays paid. Adding it creates a second $312 expense, and deleting the bill payment reopens the vendor bill. Excluding removes the bank line but leaves the entry uncleared, so it lingers on every reconciliation — match what exists, add only what is new.

17. Opening September's reconciliation, Tanya sees a beginning balance $1,265 lower than the ending balance she reconciled and signed off in August. Nothing at the bank has changed. What most likely happened?

    1. Someone entered a new August-dated transaction after the reconciliation was finished, and it falls inside the reconciled period, so it moves the opening figure.
    2. August's outstanding checks cleared in September, which pulls the beginning balance down by the amount still outstanding at August month end.
    3. A transaction that had been reconciled in August was later deleted or edited, which takes it back out of the reconciled total carried forward.
    4. September's deposits in transit are counted twice — once inside August's ending balance and again at the start of September's reconciliation.

    Answer: C) A transaction that had been reconciled in August was later deleted or edited, which takes it back out of the reconciled total carried forward.. A beginning balance is not typed in; it is the sum of everything already marked reconciled. It moves only when a reconciled transaction moves — deleted, re-dated, or re-amounted. A new August entry that was never reconciled shows up in September's list instead, and outstanding checks and deposits in transit were never in that total, so clearing them changes nothing — reconciled history stays frozen.

18. Luis has entered every line of the March statement and the reconciliation is still out by $124. The statement shows a $62 service charge, a $310 customer deposit and check 4102 for $1,240. Which error would leave him out by exactly $124?

    1. The $62 service charge was never entered in the books, so the register sits higher than the bank by the amount of the fee.
    2. The $310 deposit was entered twice, once from the bank feed and once by hand, so the register sits higher than the bank.
    3. Check 4102 was recorded in the books as $1,204 rather than $1,240, a transposition that leaves the register above the bank by the difference.
    4. The $62 service charge was entered as a deposit rather than a withdrawal, which moves the register the wrong way by that amount twice over.

    Answer: D) The $62 service charge was entered as a deposit rather than a withdrawal, which moves the register the wrong way by that amount twice over.. A difference that is exactly twice an amount on the statement points to a transaction posted on the wrong side: booking the $62 fee as money in instead of money out misses by $62 twice. A fee left out entirely is off by $62, a doubled deposit by $310, and a $1,204-for-$1,240 transposition by $36 — the size of the difference names the error.

19. It is the last day of the close and Renee's checking reconciliation is still out by $312. The software offers to finish anyway and post the difference as an automatic adjustment. What should she do?

    1. Stop and find the $312 first, because the automatic adjustment posts a plug entry that hides whatever is actually wrong in the ledger.
    2. Accept the adjustment so the account reconciles on time, then look for the $312 next month when the following statement gives more evidence.
    3. Accept the adjustment and reverse it next month, so the account is reconciled now and the two plug entries net to zero across the two periods.
    4. Undo the prior month's reconciliation and rebuild it from the last statement the owner signed off, since a difference means the earlier month was wrong.

    Answer: A) Stop and find the $312 first, because the automatic adjustment posts a plug entry that hides whatever is actually wrong in the ledger.. The adjustment fixes nothing. It books $312 to a discrepancy account so the two sides tie, while the real cause — a duplicate, a missed fee, a wrong amount — stays in the ledger and in every report built from it. Reversing it next month only moves the plug, and undoing a signed-off month destroys good history — a reconciliation that balances by force proves nothing.

20. A customer pays a $2,480 invoice by card on July 9. The processor keeps a $72 fee and deposits $2,408. The owner records a $2,408 payment against the invoice and nothing else. What is wrong with that?

    1. Nothing. $2,408 is what the bank received, and recording the bank's amount lets the account reconcile.
    2. The $72 should be added to the invoice as a surcharge, billing the customer $2,552 so the company still collects $2,480.
    3. The invoice is left $72 short and the fee never reaches the books. Record the full $2,480 payment and $72 as fee expense.
    4. The $72 belongs on the invoice as a discount, since the customer paid less than the invoiced amount by using a card.

    Answer: C) The invoice is left $72 short and the fee never reaches the books. Record the full $2,480 payment and $72 as fee expense.. The customer paid the full $2,480, and the processor took $72 from the proceeds. Recording only the net leaves $72 owing on a settled invoice and keeps the fee off the profit and loss. Recorded gross, with the fee as expense, the deposit still nets to $2,408.

21. Which of these items goes on the Cash and cash equivalents line of the December 31 balance sheet?

    1. A 24-month certificate of deposit bought in November, cashable early with a penalty of three months' interest.
    2. A Treasury bill bought December 15 that matures February 10, bought to cover January payroll.
    3. A $3,000 customer check dated January 20, received December 28 and still in the desk drawer.
    4. A $9,000 overpayment a supplier has agreed to refund, expected in mid-February.

    Answer: B) A Treasury bill bought December 15 that matures February 10, bought to cover January payroll.. Cash equivalents are highly liquid investments within about three months of maturity when bought. A bill bought December 15 that matures February 10 qualifies. The 24-month CD is far too long. A postdated check can't be deposited yet, and the supplier hasn't paid the refund, so both stay receivables.

22. Dev's register report shows $1,842.50 of cash sales for Friday. The drawer holds $1,986.50, including the $150.00 opening float. How is the day recorded?

    1. Debit Cash 1,836.50 and Cash Short and Over 6.00; credit Sales 1,842.50. The $6.00 shortage gets its own account.
    2. Debit Cash 1,842.50; credit Sales 1,842.50. Take the missing $6.00 out of Monday's float.
    3. Debit Cash 1,836.50; credit Sales 1,836.50. Record sales at what the drawer held so the entry matches the deposit.
    4. Debit Cash 1,836.50 and Miscellaneous Expense 6.00; credit Sales 1,842.50. Ask the cashier to make up the shortage.

    Answer: A) Debit Cash 1,836.50 and Cash Short and Over 6.00; credit Sales 1,842.50. The $6.00 shortage gets its own account.. The register says sales are $1,842.50. The drawer less the $150.00 float is $1,836.50, so it is $6.00 short. Record the $6.00 in Cash Short and Over so the difference stays visible. Booking sales at the counted amount hides it.

23. The printer smears the payee line on check 3407 in the middle of a batch of vendor checks. What should Ray do with that check?

    1. Shred it and print the payment on the next check, since the register only needs checks that were actually issued.
    2. Write VOID across it, keep it in the check file, and record 3407 as void so the sequence stays complete.
    3. Run check 3407 through again at the end of the batch once the printer is cleaned, so no number is wasted.
    4. Set it aside blank in the check drawer for the next handwritten payment, and enter the number when it is used.

    Answer: B) Write VOID across it, keep it in the check file, and record 3407 as void so the sequence stays complete.. Every check number must be accounted for, spoiled ones included, or a forged check can hide in the gap. Void it, keep it and record the number. Reprinting or holding it blank puts live check stock back in use.

24. A customer says her $2,900 check, mailed February 12 and cashed February 16, was posted to her account March 6. Three other customers' payments were also posted two to four weeks after the bank cashed them, all by the same clerk. What does this suggest?

    1. Lapping: receipts taken on arrival and covered weeks later with another customer's money. Compare deposit dates to posting dates.
    2. Ordinary posting delays at a busy month end. The clerk applies remittances in batches, so a payment can wait a week or two.
    3. The customers are misremembering when they paid. A payment is dated when the funds finally cleared the company's bank.
    4. A statement formatting fault. The account prints the date the statement was produced instead of the date each payment was applied.

    Answer: A) Lapping: receipts taken on arrival and covered weeks later with another customer's money. Compare deposit dates to posting dates.. Money cashed February 16 but posted March 6 sat unrecorded for over two weeks. That fits lapping, where each customer's balance is covered by the next customer's payment. Ordinary batch posting doesn't run weeks late across four accounts under one clerk.

25. A long-time supplier's contact emails that Friday's $18,400 wire should go to a new bank account because the old one was closed. What should Hector do before he releases it?

    1. Reply asking for the request on company letterhead, and release the wire once the signed confirmation comes back.
    2. Check that the sender's address and signature block match the contact's earlier emails, and release it if they do.
    3. Call the supplier on the number already on file, not one from the email, and confirm the change with someone he can identify.
    4. Send a $1 test payment to the new account and release the $18,400 once the supplier emails that it arrived.

    Answer: C) Call the supplier on the number already on file, not one from the email, and confirm the change with someone he can identify.. Payment diversion fraud starts with a real-looking email, often from a mailbox the attacker controls. A matching sender address proves nothing, and any confirmation sent back by email can be answered by the attacker. Call the number already on file.

26. On January 4 the owner asks Bianca to date $28,000 of checks received January 2 and 3 as December 31 receipts, so the year closes with more cash. What happens if she does?

    1. Little changes. The work behind those checks was done in December, so dating the receipts there matches them to the period that earned them.
    2. Only the timing of revenue moves. The cash balance is untouched because the deposit still appears on the January bank statement.
    3. It is acceptable if she reverses the receipts on January 1 and re-records them on their real dates, so annual totals stay correct.
    4. December cash is overstated by $28,000 and December won't reconcile, because the bank holds no such deposit before year end.

    Answer: D) December cash is overstated by $28,000 and December won't reconcile, because the bank holds no such deposit before year end.. The bank didn't have the money on December 31, so backdating puts $28,000 of nonexistent cash on the balance sheet and a deposit in transit the bank never received. December can't reconcile without a plug, and reversing later leaves December's statements wrong.

27. A $1,750 deposit in transit first showed up on Omar's July reconciliation and is still there in September. Every other deposit on the account clears in a day or two. What should he conclude?

    1. Deposits made near a weekend or bank holiday can take several statement cycles to appear, so it will clear on its own.
    2. The bank has mislaid the deposit and will credit the $1,750 once asked, so it can stay in transit until then.
    3. Carry it forward, and write it off to bank charges if it still hasn't cleared by the end of the fiscal year.
    4. The money never reached the bank. Trace the deposit slip and the receipts behind it before adjusting or writing off anything.

    Answer: D) The money never reached the bank. Trace the deposit slip and the receipts behind it before adjusting or writing off anything.. A real deposit in transit clears in days. One that lingers was never taken to the bank, was recorded twice, or was diverted. Trace the slip, the bank's record and the payments behind it. A write-off to bank charges ends the investigation.

28. Jenna reconciles the company credit card every month, then pays the balance from checking. For March she recorded the $4,310 card payment as an office-supplies expense paid out of checking. What is the result?

    1. The card is right and only checking is wrong; the payment did clear the bank, so the expense only needs re-dating to the card statement date.
    2. March expenses are overstated by $4,310 and the card balance never comes down; the payment is a transfer from checking to the card liability.
    3. The books are right, because paying the card is the point at which the charges on it become deductible expenses of the business.
    4. Only the card is wrong; the checking side is fine because money really did leave the account and an expense records what happened.

    Answer: B) March expenses are overstated by $4,310 and the card balance never comes down; the payment is a transfer from checking to the card liability.. Every purchase was expensed the day it was charged to the card. Paying the card moves money between two balance-sheet accounts: debit the card liability, credit checking. Recording an expense instead counts the same spending twice and leaves the card balance sitting on the balance sheet, growing each month. Money leaving the bank does not by itself create an expense — the expense happened at the charge.

29. On May 14 an owner sees $14,200 in the bank app and wants to wire $9,000 today. Sofia's register shows $6,600, after $7,600 of checks mailed last week that haven't cleared. What should she tell him?

    1. Send it. $14,200 is what the bank will honour today, and outstanding checks are a timing item, not a claim on the account.
    2. Send it. The checks were recorded the day they were written, so the $7,600 is already out of the balance the bank shows.
    3. Only $6,600 is free. The $7,600 of mailed checks is already spent, so a $9,000 wire overdraws the account as they arrive.
    4. Hold every payment until the checks clear and the account is reconciled, since no money should leave an unproved balance.

    Answer: C) Only $6,600 is free. The $7,600 of mailed checks is already spent, so a $9,000 wire overdraws the account as they arrive.. The bank balance doesn't know about checks it hasn't seen. Checks in the mail will clear within days, so the register's $6,600 is the real amount available. A $9,000 wire would overdraw the account as those checks arrive.

30. At Ridgeline Supply the owner signs every check. Each Friday the bookkeeper brings him a stack of printed checks and he signs them so the mail can go out that afternoon. Which change would strengthen the payment process most?

    1. Have the bookkeeper attach a schedule of every check number, payee and amount, so the owner sees the week's total before he starts signing.
    2. Move the signing to Thursday, giving the bookkeeper a full day to catch and correct anything wrong before the checks go into the mail.
    3. Order check stock requiring two signatures above $2,500, with the bookkeeper as second signer so payments are not held up when the owner travels.
    4. Hand the owner the invoice behind each check as he signs, and stamp each invoice paid so the same bill cannot come back for a second payment.

    Answer: D) Hand the owner the invoice behind each check as he signs, and stamp each invoice paid so the same bill cannot come back for a second payment.. A signature is a control only if the signer sees what he is paying for. Reviewing the invoice at signing catches a payment with no support behind it, and cancelling the invoice stops the same bill being presented twice. A schedule shows totals, not documents, and a bookkeeper who is also a signer approves her own payments — approval means seeing the support.