ACC124 REVWIER
1. As contemplated in accounting, cash includes
Money and any negotiable instrument that is payable in
moneyand acceptable by the bank of deposit and immediate
credit
2. A bank reconciliation is
A schedule that accounts for the differences between an
enterprise’s cash balance as shown and the cash balance
shown in its general ledger
3. A cash over and short account
Is debited when the petty cash fund proves out short
4. Bank statements provide information about all of the following
except:
 decided in the bank statement
5. To be reported as “cash and cash equivalent”. The cash and
cash equivalent must be
Unrestricted in use for current operations
6. Which of the following should not be considered cash for
financial reporting purposes?
Post-dated checks and IOU’s
7. In reimbursing the petty cash fund, which of the following is
true?
Petty cash fund is credited
8. When a petty cash fund is used, which of the following is true?
The reimbursement of the petty cash should be credited to the
cash account
9. The following statements pertain to the cash short or over
account. Which statement is true?
A credit balance in a cash short or over account should be
considered a liability because the short changed customer will
demand return of this amount.
10.What is the major purpose of an imprest petty cash fund?
To effectively control cash disbursement
11. These are items not representing deposits credited by the
bankto the account of the depositor as cash receipts
Credit memo
12.These are items not representing checks paid by the bank
whichare charged or debited by the bank to the account of the
depositor but yet recorded by the depositor as cash disbursement
Debit Memo
13.These are collections already recorded by the depositor as
cash receipts but not yet reflected as the bank statement
Deposit in transit
14.These are items credited in the depositor’s book but not yet
Outstanding checks
15.Bank statement provide information about all of the following,
except:
a) Checks cleared during the period
b) DAIF checks
c) Bank charges for the period
d) Errors made by the depositor company
16.Which of the following must be added to the cash balance per
ledger in preparing a bank reconciliation which ends with the
adjusted cash balance?
Note receivable collected by bank in favor of the depositor and
credited to the account
17.Which of the following must be deducted from the bank
statement balance in preparing a bank reconciliation which ends
with adjusted cash balance?
Outstanding checks
18.If the balance shown on a company’s bank statement is less
than the correct cash balance and neither the company nor the
bank has made any errors, there must be
Deposit in transit

19.If the cash balance shown on a company’s accounting records

isless than the correct cash balance and neither the company nor
the bank has made any errors, there must be
Deposit credited by the bank but not yet recorded by the
company

20.Entries to record the replenishment of petty cash fund in a

debit to various expense accounts and a credit to cash in bank.
This accounting procedures typically exemplifies the
Fluctuating petty cash system
CASH AND CASH EQUIVALENTS
THEORIES
1.As contemplated in accounting, cash includes
a.Money only
b.Money and any negotiable instrument
c.Any negotiable instrument
d.Money and any negotiable instrument that is payable in money
and acceptable by the bank for deposit and immediate credit
2.To be reported as “cash and cash equivalent”, the cash and
cash equivalent must be
a.Unrestricted in use for current operations
b.Available for the purchase of property, plant and equipment
c.Set aside for the liquidation of long-term debt
d.Deposited in the bank
3.Cash equivalents are
a.Short-term and highly liquid investments that are readily
convertible into cash
b.Short-term and highly liquid investments that are readily
convertible into cash with remaining maturity
of three months or more
c.Short-term and highly liquid investments that are readily
convertible into cash with remaining maturity of three months or
less
d.Short-term and highly liquid marketable equity securities
4.Which is false concerning measurement of cash and cash
equivalents?
a.Cash is measured at face value
b.Cash in foreign currency is measured at the current exchange
rate
c.If a bank or financial institution holding the funds of the
company is in bankruptcy or financial difficulty,
cash should be written down to estimated realizable value
d.Cash equivalents should be measured at maturity value,
meaning face value plus interest
5.If material, deposits in foreign bank which are subject to foreign
exchange restriction should be classified
a.Separately as current asset, with appropriate disclosure
b.Separately as a non-current asset with appropriate disclosure
c.Be written off as an extraordinary loss
d.As part of cash and cash equivalents
6.Bank overdraft
a.Is a debit balance in a cash in bank account
b.Is offset against demand deposit account in another bank
c.Which cannot be offset is classified as a current liability
d.Which cannot be offset is classified as non-current liability
7.A compensating balance 10.Which of the following is usually considered cash?
a.Must be included in cash and cash equivalent a.Certificates of deposit
b.Which is legally restricted and related to a long-term loan is b.Checking accounts
classified as a current asset c.Money market savings certificates
c.Which is legally restricted and related to a short-term loan is d.Post-dated checks
classified separately as a current asset
d.Which is not legally restricted as to withdrawal is classified 11.Petty cash fund is
separately as current asset a.Separately classified as current asset
b.Money kept on hand for making minor disbursements of coin
8.Unreleased checks and currency rather than by writingchecks
a.Should be treated as outstanding checks c.Set aside for the payment of payroll
b.Should be restored to the cash balance d.Restricted cash
c.Should be treated as outstanding checks if the date is shortly
after the balance sheet 12.The petty cash account under the imprest fund system is
d.Should be treated as outstanding checks if they are ultimately debited
encashed a.Only when the fund is created
b.When the fund is created and every time it is replenished
9.Which of the following should not be considered cash for c.When the fund is created and when the size of the funds is
financial reporting purposes? increased
a.Petty cash funds and change funds d.When the fund is created and when the size of the funds is
b.Money orders, certified checks and personal checks decreased
c.Coin, currency and available funds
d.Post-dated checks and IOUs 13.The internal control feature that is specific to petty cash is
a.Separation of duties
b.Assignment of responsibility
c.Proper authorization
d.Imprest system d.With the establishment of an imprest petty cash fund, one
person is given the authority and
14.In reimbursing the petty cash fund, which of the following is responsibility for issuing checks to cover minor disbursements
true?
a.Cash is debited 17.The following statements pertain to the cash short or over
b.Petty cash is debited account. Which statement is true?
c.Petty cash is credited a.It would be impossible to have cash shortage or overage if
d.Expense accounts are debited employees were paid in cash rather than by
check
15.A cash over and short account b.The entry to account for daily cash sales for which a small
a.In not generally accepted amount of cash shortage existed would
b.Is debited when the petty cash fund proves out over include a debit to cash short or over account
c.Is debited when the petty cash fund proves out short c.If the cash short or over account has a debit balance at the end
d.Is a contra account to cash of the period it must be debited to an
expense account
16.The following statements pertain to accounting for petty cash d.A credit balance in a cash short or over account should be
fund. Which statement is false? considered a liability because the short
a.Each disbursement from petty cash should be supported by a changed customer will demand return of this amount
petty cash voucher
b.The creation of a petty cash fund requires a journal entry to 18.A bank reconciliation is
reflect the transfer of fund out of the a.A formal financial statement that lists all of the bank account
general cash account balances of an enterprise
c.At any time, the sum of cash in the petty cash fund and the total b.A merger of two banks that previously where competitors
of petty cash vouchers should equal c.A statement send by the bank to depositor on a monthly basis
the amount for which the imprest petty cash fund was established
d.A schedule that accounts for the differences between an
enterprise’s cash balance as shown on its
bank statement and the cash balance shown in its general ledger
19.Which of the following items must be added to the cash
balance per ledger in preparing a bank reconciliation which ends
with the adjusted cash balance?
a. Note receivable collected by bank in favor of the depositor and
credited to the account of the depositor
b.NSF customer check
c.Service charge
d.Erroneous bank debit
20.Which of the following must be deducted from the bank
statement balance in preparing a bank
reconciliation which ends with adjusted cash balance?
a.Deposit in transit
b.Outstanding check
c.Reduction of loan charged to the account of the depositor
d.Certified check
21.If the balance shown on a company’s bank statement is less
than the correct cash balance and neither the
company nor the bank has made any errors, there must be
a.Deposits credited by the bank but not yet recorded by the
company
b.Outstanding checks
c.Deposits in transit
d.Bank charges not yet recorded by the company
22.If the cash balance shown on a company’s accounting records
is less than the correct cash balance and neither the company
nor the bank has made any errors, there must be
a.Deposits credited by the bank but not yet recorded by the
company
b.Outstanding checks
c.Deposits in transit
d.Bank charges not yet recorded by the company
23.Which will not require an adjusting entry on the depositor’s
books?
a.NSF check from customer
b.Check in payment of account payable amounting to P50,000 is
recorded by the depositor as P5,000
c.Deposit of another entity credited to the account of the
depositor
d.Bank service charge
24.Which statement is true?
a.Bank service charge will cause the cash balance per ledger to
be higher than that reported by the
bank, all other things being equal
b.Outstanding checks will cause the cash balance per ledger to
be greater than the balance reported by
the bank, all other things being equal
c.An error made by the bank by charging an amount to the
depositor’s account requires a correcting entry in the depositor’s
own records
d.The cash amount shown in the balance sheet must be the
balance reported in the bank statement
25.A proof of cash
a.Is a physical count of currencies on hand on balance sheet date
b.Is a formal statement showing that total cash receipts during
the year
c.Is a four-column bank reconciliation showing reconciliation of
cash balances per book and per bank at the beginning and end of
the current month and reconciliation of cash receipts and cash
disbursementsof the bank and the depositor during the current
month
d.Is a summary of cash receipts and cash payments
26.The following statements relate to cash. Which statement is
true?
a.The term cash equivalent refers to demand credit instruments
such as money order and bank drafts
b.The purpose of establishing a petty cash fund is to keep
enough cash on hand to cover all normal operating expenses for
a period of time
c.Classification of a restricted cash balance as current or
noncurrent should parallel the classification of the related
obligation for which cash was restricted
d.Compensating balance required by a bank should always be
excluded from cash and cash equivalents
27.Which is not considered as a cash equivalent?
a.A three-year treasury note maturing on May 30 of the current
year purchased by the entity on April 15
of the current year
b.A three-year treasury note maturing on May 30 of the current
year purchased by the entity on January 15 of the current year
c.A 90-day T-bill
d.A 6-day money market placement
28.As of December 31 of the current year, an entity had various
checks and papers in its safe. Which item
should not be in its cash account in the current year-end balance
sheet?
a.US$ 20,000 cash
b.Past due promissory note issued in favor of the entity by its
President
c.Another entity’s P150,000 check payable to the entity dated
December 15 of the current year
d.The entity’s undelivered check payable to a supplier dated
December 31 of the current year
29.Which item should be excluded from cash and cash equivalent
on the current year-end balance sheet of an
entity?
a.The minimum cash balance in the entity’s current account
which is maintained to avoid service charges
b.A check issued by the entity on December 27 of the current
year but dated January 15 of next year
c.Time deposit which matures in one year
d.A customer’s check denominated in a foreign currency
30.At December 31 of the current year, an entity had cash
accounts at three different banks. One account
balance is segregated solely for payment into a bond sinking
fund. A second account, used for branch
operations, is overdrawn. The third account, used for regular
corporate operations, has a positive balance.
How should these accounts be reported in the December 31
classified balance sheet?
a.The segregated account should be reported as a non-current
asset, the regular account should be reported as a current asset,
and the overdraft should be reported as a current liability
b.The segregated and regular accounts should be reported as
current assets, and the overdraft should
be reported as a current liability
c.The segregated account should be reported as a non-current
asset and the regular account should be
reported as a current asset net of the overdraft
d.The segregated and regular accounts should be reported as
current assets net of the overdraft
PROBLEMS
1.San Miguel Corporation provided the following data on
December 31, 2014:
Checkbook balance...............................................P4,000,000
Bank statement balance........................................5,000,000
Check drawn on San Miguel’s account, payable to supplier, dated
and recorded on December 31, 2015 but not mailed until
until January 2016.........................................…….500,000
Cash in sinking fund..............................................2,000,000
On December 31, 2015, what amount of cash should be reported
as cash under current assets?
a.P 4,500,000
b.P 5,500,000
c.P 3,500,000
d.P 6,500,000
2.On December 31, 2015, DALTA Inc. reported cash accounts
with the following details:
Undeposited collections................................................P60,000
Cash in bank – PCIB checking account........................500,000
Cash in bank – PNB (overdraft)....................................(50,000)
Undeposited NSF check received from customer dated
12/01/14.......………………………………………………..15,000
Undeposited customer check, dated 01/15/25.......…….25,000
Cash in bank – PCIB (fund for payroll)..........................150,000
Cash in bank – PCIB (savings deposit).........................100,000
Cash in bank – PCIB (90-day money market instrument)
………………………………………………..2,000,000
Cash in foreign bank – restricted.........................…….100,000
IOUs from officers.............................................……….30,000
Sinking fund cash........................................................450,000
Financial asset held for trading...................................120,000
On December 31, 2014, what total amount should be reported as
cash and cash equivalents?
a.P 2,660,000
b.P 2,810,000
c.P 2,770,000
d.P 810,000
3.SMART Telecoms had the following balances on December 31,
2014:
4.Cash in bank.............................................................P2,250,000
Cash on hand.................................................................125,000
Cash restricted for plant addition....................................1,600,000
5.Cash in bank included P600,000 of compensating balances
against short-term borrowing agreement. The compensating
balance is not legally restricted as to withdrawal. On December
31, 2015,
what total cash should be reported under current assets?
a.P 1,775,000
b.P 2,250,000
c.P 2,375,000
d.P 3,975,000
6.Petron Tri-Activ had the following account balances on
December 31, 2015:
7.Cash in bank..............................................................P2,250,000
8.Cash on hand................................................................125,000
9.Cash restricted for plant acquisition
10.(to be disbursed in 2016)................................………1,600,000
11.Cash in bank included P600,000 of compensating balance
against long-term borrowing. Thecompensating balance is
not legally restrictedas to withdrawal. On December 31, 2015,
what is the totalcash to be reported under current assets?
a.P 1,775,000
b.P 2,250,000
c.P 2,375,000
d.P 3,950,000
12.F2 Logistic Cargo reported that the cash had a balance on
December 31, 2015 of P 4,415,000 which
consisted of the following:
13.Petty cash fund...........................................................P24,000
Undeposited receipts including PDC for P70,000......…1,220,000
Cash in PNB, per bank statement, with P40,000 outstanding
checks....……………………………………………………2,245,000
Bonds in sinking fund......................................................850,000
Vouchers paid out of collection, not yet recorded...........43,000
IOUs signed by employees......................................……33,000
14.What amount of cash should be reported as cash on
December 31, 2015?
a.P 3,379,000
b.P 3,419,000
c.P 3,489,000
d.P 3,449,000
15.Apple Co. provided the following information with respect to
the cash and cash equivalents on December
31, 2015:
16.Checking account at first bank..............................P(200,000)
17.Checking account at second bank................……..3,500,000
18.Treasury bonds.....................................................1,000,000
19.Payroll account..........................................................500,000
20.VAT account..............................................................400,000
21.Foreign bank account – in peso (unrestricted)....…..2,000,000
22.Postage stamps..................................................…..50,000
23.Employee’s postdated check.....................................300,000
24.IOU from president....................................................750,000
25.Credit memo from a vendor for purchase returns.......80,000
26.Travelers check.......................................................300,000
27.NSF check........................................................……150,000
28.Petty cash fund (P20,000 cash & P30,000 vouchers)...50,000
29.Money order.........................................................……180,000
30.What amount should be reported as unrestricted cash on
December 31, 2015?
a.P5,900,000
b.P4,600,000
c.P4,900,000
d.P6,900,000
31.Nike reported petty cash fund with the following details:
32.Currencies..................................................................P20,000
33.Coins.......................................................................…….2,000
34.Petty cash vouchers
35.Gasoline payment for delivery of equipment............…….3,000
36.Medical supplies for employees...............................……..1,000
37.Repairs of office equipment...................................……….1,500
38.Loans to employees.........................................................3,500
39.Check drawn by the entity payable to the order of Grace de la
Cruz,
40.the petty cash custodian, representing her salary...........15,000
41.NSF employee check......................................................3,000
42.A sheet of paper with names of several employees together
43.With contribution for a birthday gift of a co-employee....5,000
44.The petty cash general ledger account has an imprest balance
of P50,000. What is the amount of petty cash fund that should be
reported in the Statement of Financial Position?
a.P 27,000
b.P 37,000
c.P 22,000
d.P 42,000
45.On December 31, 2015, Cignal HD had the following cash
balances:
46.Cash in bank..........................................................P1,800,000
47.Petty cash fund (all funds were reimbursed on 12/31/15)
……………………………………………………….50,000
48.Time deposit (due February 1, 2016)...........................250,000
49.Cash in bank included P600,000 of compensating balance
against short-term borrowing arrangement on 12/31/15. The
compensating balance is legally restricted as to withdrawal. On
December 31, 2015, what is the amount that is to be reported as
cash and cash equivalents?
a.P 2,100,000
b.P 1,950,000
c.P 1,500,000
d.P 1,250,000
50.New San Jose Builders Inc. reported petty cash fund which
comprised the following:
51.Coins and currencies....................................................P3,300
52.Paid vouchers
53.Transportation........................................................………600
54.Gasoline........................................................................….400
55.Office supplies..................................................................500
56.Postage stamps................................................................300
57.Due from employees............................................……….1,200
_______3,000
58.NSF managers check.....................................................1,000
59.Checks drawn by the order of the custodian...............….2,700
60.What is the correct amount of petty cash fund for financial
statement presentation purposes?
a.P 10,000
b.P 7,000
c.P 6,000
d.P 9,000
61.Megaworld Co. established a P3000 petty cash fund. You
found the following items in the fund:
62.Cash & Currency......................................................P1683.80
Expense Vouchers............................................................829.80 c.P11,180
Advances to employees..............................................……200.00 d.P 3,980
IOU from employees..........................................................300.00
69.Fédération Internationale de Volleyball
63.In the entry to replenish the fund, what amount should be provided the following information in preparing the August 31,
debited to the cash short or over account? 2015 bank reconciliation:
a.P 13.60 70.Balance per bank statement................................P1,805,000
b.P 300.00 71.Deposit in transit....................................................325,000
c.P 500.00 72.NSF customer check...............................................60,000
d.P 0 73.Outstanding checks................................................275,000
74.Bank service charge for August...............................10,000
64.Stark Industry’s accountant is preparing its October bank 75.On August 31, 2015, how much is the adjusted cash balance?
reconciliation and has collected the following data: a.P 1,855,000
65. Per Books Per Bank b.P 1,795,000
66.Oct. 1 balance.............… .P11,600 P10,000 c.P 1,785,000
Oct. deposits.......................… 24,600 21,200 d.P 1,755,000
Oct. checks.........................… 27,800 29,000
Note Collected (plus 10% interest).......0 4,400 76.FIBA prepared the following bank reconciliation on December
Oct. service charge..............................0 20 31, 2015:
Oct. 31 balance...................................8,400 6,580 77.Balance per bank statement...............................….P2,800,000
78.Add:Deposit in transit..........................................…....195,000
67.Additionally, deposits in transit and outstanding checks from 79.Checkbook printing charge................................…….….5,000
September reconciliation were P4,400 and P2,800, respectively. 80.Error made in recording check no. 45 last December...35,000
68.The correct cash balance at October 31 should be: 81.NSF check..................................................................110,000
a.P10,960 82.Less:Outstanding checks...........................................100,000
b.P12,780 83.Note collected by bank..............................................215,000
84.Balance per book....................................................P2,830,000 d.P 561,600
85.The entity had P200,000 cash on hand on 12/31/15. How
much should be reported as cash in the 95.Samsung Inc. uses four-column bank reconciliation. The bank
statement of financial position? reconciliation for March shows outstanding checks for P300.
a.P 2,930,000 During April, the company wrote check totaling P23,600. The
b.P 3,095,000 bank statement for April shows P23,010 of checks clearing the
c.P 2,895,000 company’s account. The amount of outstanding checks on April
d.P 3,130,000 bank reconciliation must be:
a.P 890
86. b.P 600
87.When a company’s bookkeeper started to prepare the monthly c.P 300
bank reconciliation, the cash account showed a balance of d.P 1,200
P528,600. At the end of the month, the following information was
available from the company records and the monthly bank 96.Nitendo Co. reported a balance of P14,300 in its cash account
statement: at the end of the month. There were P12,000 deposits in transit
88.Customers NSF check listed in the bank statement..P40,800 and P11,500 of checks outstanding. The bank statement showed
89.Bank service charge......................................................2,400 a balance of P15,000. Service charge of P600, and the collection
90.Outstanding check.................................................…..178,000 of a note plus interest. The note had a face value of P1500. How
91.Deposit of 45,000 was erroneously credited in the bank much interest did the company collect?
statement as...............……………………………………..54,000 a.P 1,800
92.Company wrote 1,700 but recorded it as.....................7,100 b.P 300
93.Customer default on account......................................12,600 c.P 2,400
94.The correct cash balance should be: d.P 1,200
a.P 572,400
b.P 490,800
c.P 581,400
97.Sony uses four-column bank reconciliation. The bank b.P105,300
statement for May shows payments of P13,150, c.P140,000
including service charge of P200. At the beginning of May, there d.P174,700
were P900 of checks outstanding. At the end of May, there were
P1,200 of checks outstanding. Before recording the bank service 100.GIC Enterprise’s cash account had a balance of P96,200 on
charge, Sony must have recorded May payments of: August 31. This included a bank deposit of P8,700 that was in
a.P13,250 transit on the 31st. The August 31 bank statement contained the
b.P12,650 followinginformation:
c.P13,050 101.Bank statement balance..........P108,900
d.P13,650 NSF check...........................P1,600
102.Bank service charge................1,700
98.A company received its monthly bank statement, which Collection of note...................8,600
showed an ending balance of P150,000. Adjustment on the bank 103.GIC also had an outstanding check of P16,100. What is
reconciliation included a deposit in transit of P20,000; outstanding GIC’s reconciled balance?
checks of P30,000; NSF check of P5,000; bank service charge of a.P92,900
P300; proceeds of a note collected by the bank of P40,000. What b.P96,200
was the correct cash balance to be shown in the statement of c.P104,700
financial position? d.P101,500
a.P134,700
b.P105,300
c.P140,000
d.P174,700

99.Using the same information in no. 18, how much is the

unadjusted cash balance per books?
a.P134,700
Question 1
Define the bank reconciliation statement
Answer : Bank reconciliation statement is a statement that helps
the business in matching the bank transactions recorded in
company books with that present in the bank statement. It is
useful in checking correctness of recorded data in books of
company and therefore ensures accuracy of bank records.
Question 2
What do you mean by a debit balance in Passbook?
Answer : The debit balance in passbook means overdraft.
Question 3
State two reasons for the difference between the company’s cash
book and bank balance
Answer : The two reasons for the difference between the
company’s cash book and bank balance
 Bank issued cheque but not yet presented for payment
 Cheque deposited but not cleared
Question 4
Why is the bank reconciliation statement important?
Answer : The bank reconciliation statement is important to
determine the cause for the difference made on the part of the
bank or customers side.
Question 5
Which balance is caused an overdraft of cash book and
passbook?
Answer : Cash book Cr. and Passbook Dr. balances.
Question 6
Mention two items drafted in a plus column while starting with a
debit balance of cash book.
Answer : The two items drafted in a plus column while starting
with a debit balance of cash book are.
 Bank issued cheque but not yet presented for payment
 Interest allowed by the bank but not recorded in the cash
book
Question 7
Mention two items drafted in a minus column while starting with a
debit balance of cash book.
Answer : The two items drafted in a minus column while starting
with a debit balance of cash book are.
 Cheque deposited but not cleared
 Bank made direct payment from the customer’s side
Question 8
Mention two items drafted in a minus column while starting with
an overdraft balance of cash book.
Answer : The two items drafted in a minus column while starting
with an overdraft balance of cash book are.
 Cheque deposited but not cleared
 Bank made direct payment from the customer’s side
Question 9
Mention two items drafted in a plus column while starting with an
overdraft balance of cash book.
Answer : The two items drafted in a plus column while starting
with an overdraft balance of cash book are.
 Bank-issued cheque but not yet presented for payment
 Interest allowed by the bank but not recorded in the cash
book
Question 10
A bank reconciliation statement is prepared to.
(a) Reconcile Bank balance as per cash book and bank balance (d) Auditors
as per pass book
Answer : b
(b) Reconcile Cash balance as per cash book and bank balance
Question 14
as per pass book
Which of the statement is not a part of the Double Entry System
(c) Both (a) & (b)
(a) Cash Book
(d) None of the above
(b) Trial Balance
Answer : a
(c) Journal
Question 11
(d) Bank Reconciliation Statement
A Pass Book is a copy of
Answer : d
(a) A customer’s account in the bank’s book
Question 15
(b) Cash book relating to bank column
A debit balance in passbook is defined as an overdraft. Is it true
(c) Cash book relating to cash column
or false?
(d) Firm’s receipts and payments
Answer : True
Answer : a
This concludes the article on the topic of Important Questions
Question 12 with Answers for CBSE Class 11 Accountancy Chapter 5 Bank
Reconciliation statement, which is an important topic for Class 11
A bank reconciliation statement is prepared with the balance of
Commerce students. For more such interesting articles, stay
(a) Cash Book tuned to BYJU’S.
(b) Pass Book
(c) Either Cash Book or Pass Book
(d) Neither Cash Book nor Pass Book
Answer :  c
Question 13
A bank reconciliation statement is prepared by
(a) Bank
(b) Customers of the Bank
(c) Creditors
 (Note: So, the Back reconciliation statement is made by matching
MCQ On Bank Reconciliation Statement the entries in the passbook with entries in the bank column of the
cash book.)
1. The Cash Book debit balance is equivalent to?
3. When the Cash amount as per the Cash Book is the
A.  Credit Balance as per passbook  beginning point, explicit deposits by the bank holder are
known as?
B. Overdraft as per Cash Book

C .Overdraft as per Pass Book A. Subtracted 

D.. None of the above B. Added

Ans: A. Credit Balance as per passbook  C. Not need to be adjusted

(Note: When your cash book balance is debited, the passbook D. Neither of the two 
balance is a credit balance. As a result, both books’ balances will Ans: B.) Added
be favourable. Otherwise, it is unfavorable while it’s opposite to
each other.) (Note: As you know, the passbook balance will increase due to
the direct amount by the customer in the bank. The balance of
2. How is the Bank Reconciliation Statement prepared?  the cash book will decrease with the same amount.)

A.  By matching entries in the passbook with entries in the bank 4. The Bank Reconciliation Statement is the Part of?
and cash column of the cash book 
a. Double-entry system
B.  By matching the entries in the passbook with entries in the b. Not a Part of the Double-entry system
bank column of the cash book  c. Bank Statement 
d. None of all of these 
C. By matching the entries in the passbook with entries in the
cash column of the cash book  Ans: B.) Not a Part of the double-entry system

D. None of the above  (Note: You know very well that you are reconciling the balances
through the Bank Reconciliation Statement. The Bank
Ans: C. By matching the entries in the passbook with entries
Reconciliation Statement is simple, and it is not a part of the
in the bank column of the cash book 
Double-entry system.) 

5. Who is preparing the Bank Reconciliation Statement?

a. Debtor cash book balance will be credited, and it’s known as a credit
b. Creditor  balance.)
c. Account Holder 
8. A Bank Reconciliation Statement is made up using the
d. Bank 
……… from following which?
Ans: C.) Account Holder 
A. The bank column of the Cashbook and the Bank Statement
(Note: The balances are simply reconciled by the accountant and B. The Cash column of the Cashbook and Bank statement
account holder to match the cash book and passbook.)  C. Bank column of the cash book and cash column of the
Cashbook
6. Which amount of the following does not need to be
D. None of all of the above 
adjusted into the cash book balance?
Ans: A.) The bank column of the Cashbook and the Bank
a. Cheques mistakenly credited by the bank Statement
b.  Cheques deposited but not cleared
c. cheques issued but not showing (Note: The Bank Reconciliation Statement is prepared with the
help of the Bank Statement and the bank column of the
d. All of these 
Cashbook.) 
Ans: A.) Cheques mistakenly credited by the bank
9. The customer account is ………….when he withdraws the
(Note: Because the bank credited our account mistakenly for this amount from the bank?
amount, you do not need it. So you do not add it to the cash book
balance for the adjustment.) A. Debited
B. No effect 
7. If the Account holder deposits the cash in the bank, then it
C. Credited 
is known as?
D. None of these 
A. Expense Ans: A.) Debited
B. Liability
C. Credit (Note: As you know, when cash is withdrawn from your bank
account, money will reduce from your bank. So, it is known as a
D. Debit
debited amount from the bank account.)
Ans: C.) Credit 
10. What is the “deposit in transit” treatment in a bank
(Note: The more courage you deposit in the bank, the bank’s reconciliation? 
liability will increase, and your bank balance will increase. So the
A. Recorded in books
B. Recorded in banks
C. Subtracted from the cash book balance
D. Subtracted from the Passbook balance
Ans: A) Added to the passbook balance
(Note: It is recorded in the cash book but not in the Passbook.
So, your cash book balance has been increased, but it’s not
recorded in Passbook. So, to reconcile the balance of both
books, kindly record the balance in the Passbook.)
11. NSF” mark in the cheque sent back by the bank indicate?
A. No sufficient funds or money
B. The check has been rejected
C. The Cheque has been forged
D. A bank could not verify the identity
Ans: A.) No sufficient funds or money
(Note: The full form of the NSF is not providing sufficient funds
into your bank account. So, the NSF indicates no sufficient funds
or money in your bank account.)
12. Unpresented cheques are also known as?
A.  Uncollected cheques
B. Uncredited cheques
C. Outstanding cheques 
D. None of all of the above
Ans: C.) Outstanding cheques  Bank Reconciliation Statement?
(Note: The unpresented cheque means a cheque issue but not
presented for payment into the bank. So, its amount is not
debited from a bank account but is deducted from the cash
book.) 
13. If any cash balance is instantly deposited into the bank,
then it is shown what?
A. Cashbook will show a double balance 
B. Cashbook will display less amount of the cash, and the
Passbook will demonstrate the more balance
C. Passbook will show a double balance 
D. Cashbook will show increased balance, and the bank will show
fewer
Ans.D) Cashbook will show less balance, and the bank will
show more 
(Note: If the cash is deposited directly in your bank, the bank
balance will increase. But if you do not enter it in your cash book,
the amount will reduce.)
14. If the Cash amount as per the passbook is the beginning
point, then the rate of the bank interest will be permitted?
A. Deducted
B. Added
C.  No effect
D. None of all of these 
Ans: A.) Subtracted 
15. What is the most prominent purpose of preparing the
A. To confirm the cash collections have been deposited into the
bank suitably and the payments have been processed
B. To know about the balance of the PassBook  18. The Balance of the reconciliation of the cash ledger book
C. To know about the balance of the Cashbook reconcile with the cash in the register is an example of
D. None of all of these 
A. Other rules
Ans: A.) The cash collections have been deposited into the B. Separate internal confirmation
bank suitably, and the payments have been processed C. Establishment of duty
D. Segregation of responsibilities
16. What are the various steps to completing a bank
reconciliation? Ans: B.) Separate internal confirmation

A. Obtain bank records and Collect your company records 19. Which of these below-given points is not an internal
B. Find a place to start, check the income and expenses in your management method for cash?
books, and Go over your bank withdrawals and deposits
A. Cash is deposited daily
C. Adjust the cash balance, Compare the end balances, and
B. There should be limited access to cash
Adjust the bank statements
C. Keep the amount of cash on hand to a minimum
D. All of the above points
D. Payments are made with cash
Ans: D.) All of the above points
Ans: D.) Payments are made with cash
(Note: So, to end bank reconciliation, you have to need to collect
your company records, locate a place to begin, get bank records, 20. Which of the below-given items on a bank statement
go over your bank withdrawals and deposits, Adjust the bank reconciliation would need an adjusting entry on the
statements, Accommodate the cash balance, Check the company’s books?
expenses and income in your books, and Analogize the end
balances.) A. An error by the bank
B. Outstanding checks
17. The Balance of the replenished petty cash fund contains C. A bank service charge
a credit to D. A deposit in transit

a. Petty Cash Ans: C.) A bank service charge

b.  Cash
c. Freight-In
d. Postage Expense
Ans: B.) Cash Account
 A) Added to Bank Balance
B) Subtracted From Bank Balance
C) Subtracted From the Cash Book Balance
D) Added to Cashbook Balance
Bank Reconciliation Statement MCQs
Answer: A
1. In cash book, the favourable balance indicates
5. ‘NSF’ marked in cheque sent back by the bank indicates
A) Credit Balance
A) Cheque has been forged
B) Debit Balance
B) A bank couldn’t verify the identity
C) Bank Overdraft
C) Not sufficient funds
D) Adjusted Balance
D) A cheque cannot be cashed because it’s illegal
Answer: B
Answer: C
2. On the bank statement, cash deposited by the company is
known as 6. Bank reconciliation description is composed of

A) Credit A) Bank Accountant

B) Debit B) Business Manager

C) Liability C) Business Accountant

D) Expenses D) Controller of the bank

Answer: A Answer: C

3. Bank reconciliation statement compares a bank statement with 7. An unadjusted balance in cash book is because of the result of
_________ which error?

A) Cash payment journal A) Deposit in transit

B) Cash receipt journal B) The omission of Bank charges

C) Financial statements C) Outstanding cheques

D) Cashbook D) Unpresented cheques

Answer: D Answer: B

4. What is “Deposit in transit” in bank reconciliation? 8. Unpresented cheques also referred to as

A) Bounced cheques
B) Outstanding cheques
C) Uncredited cheques
D) Uncollected cheques
Answer: B
9. In cash book, bank charges of ₹5,000 was not recorded. Name Multiple Choice: Theories
the correct cash book adjustment
1.It is a report that is prepared for the purpose of bringing the
A) It will be credited in cash book balances of cash per records and per bank statement into
B) It will be debited in cash book agreement.
a.Bank statement 
C) No adjustment needed in the cash book b.Check Disbursement Voucher
D) Charges will be added to the cash book balance c.Bank reconciliation
d.Bank deposit slip
Answer: A
2.These are deposits made but not yet credited by the bank to
10. What type of cheques is that which is issued by a firm but not
the depositor’s bank account.
yet presented to the bank
 a.Credit memos (CM)
A) Uncredited cheques  b.Debit memos (DM)
c.Outstanding checks (OC)
B) Outstanding cheques
d.Deposits in transit (DIT)
C) Uncollected cheques
3.These are deductions made by the bank to th
D) Bounced cheques e depositor’s bank account but not yet recorded by
Answer: B the depositor.
a. Credit memos (CM) 
b. Debit memos (DM)
c. Outstanding checks (OC
d.  Deposits in transit (DIT)

4.These are additions made by the bank to the depositor’s bank account
but not yet recorded by
the depositor
a. Credit memos (CM)
b. Debit memos (DM
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
5. These are checks drawn and released to payees but are not
yet encashed with the bank
a. Credit memos (CM) 
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT
6. Which of the following is added to the cash balance per books 1. Accounts receivable (A/R) is one of a series of transactions
when preparing a bankreconciliation statement?
dealing with the billing of a customer for goods and services
a. Credit memo
b. Debit memo he/she has ordered.
c. outstanding check
A. Accountancy
d. Deposit in transit
B. Balance sheet
Ans: A

2: Companies can use their accounts receivable as collateral

when (asset-based lending) or sell them through
obtaining a
factoring.
A. Debt
B. Loan
C. Bond (finance)
D. Credit (finance)
Ans: B

3: In most business entities this is typically done by generating an

and mailing or electronically delivering it to the customer, who in
turn must pay it within an established timeframe called "creditor
payment terms."
A. Order (business)
B. Accounts payable Ans: D
C. Invoice
D. Sales
Ans: C
4: Pools or portfolios of accounts receivable can be sold in the 7: The two methods are not mutually exclusive, and some
capital markets through a businesses will have a provision for doubtful debts and will also
A. Securitization write off specific debts that they know to be bad (for example, if
B. Collateralized debt Obligation the debtor has gone into
C. Bond (finance) A. Liquidator (law)
D. Mortgage-backed security B. Unfair preference
Ans: A C. Floating charge
D. Liquidation
5: The change in the bad debt provision from year to year is Ans: D
posted to the bad debt expense account in the
A. Cash flow statement 8. A firm's inventory turnover (IT) is 5 times on a cost of goods
B. Revenue sold (COGS) of $800,000. If the IT is improved to 8 times while
C. Income statement the COGS remains the same, a substantial amount of funds is
D. General ledger released from or additionally invested in inventory. In fact,
Ans: C A. $160,000 is released.
B. $100,000 is additionally invested.
6: On a company's accounts receivable is the money owed to that C. $60,000 is additionally invested.
company by entities outside of the company. D. $60,000 is released.
A. Equity (finance) Ans: D
B. Accountancy
C. Asset 9. Ninety-percent of Vogel Bird Seed's total sales of $600,000 is
D. Balance sheet on credit. If its year-end receivables turnover is 5, the average
collection period (based on a 365-day year) and the year-end B. the larger the opportunity cost of the funds invested in
receivables are, respectively: inventory, the larger the safety stock.
A. 365 days and $108,000. C. the greater the uncertainty associated with forecasted
B. 73 days and $120,000. demand, the smaller the safety stock.
C. 73 days and $108,000. D. the higher the profit margin per unit, the higher the safety stock
D. 81 days and $108,000. necessary.
Ans: C Ans: D

10. If EOQ = 360 units, order costs are $5 per order, and carrying
costs are $.20 per unit, what is the usage in units?
A. 129,600 units
B. 2,592 units
C. 25,920 units
D. 18,720 units
Ans: B

11. Costs of not carrying enough inventory include: A. lost sales.

B. customer disappointment.
C. possible worker layoffs.
D. all of these.
Ans: D

12. Which of the following relationships hold true for safety stock?
A. the greater the risk of running out of stock, the smaller the
safety of stock.

TRUE-FALSE STATEMENTS
1. Trade receivables occur when two companies trade or
exchange notes receivables.
2. Other receivables include nontrade receivables such as loans
to company officers.
3. Both accounts receivable and notes receivable represent
claims that are expected to be collected in cash.
4. Receivables are valued and reported in the balance sheet at
their gross amount less any sales returns and allowances and
less any cash discounts.
5. The three primary accounting problems with accounts
receivable are: (1) recognizing, (2) depreciating, and (3)
disposing.
6. Accounts receivable are the result of cash and credit sales.
7. If a retailer assesses a finance charge on the amount owed by
a customer, Accounts Receivable is debited for the amount of the
interest.
8. If a company uses the allowance method to account for
uncollectible accounts, the entry to write off an uncollectible
account only involves balance sheet accounts.
9. The percentage of receivables basis of estimating expected
uncollectible accounts emphasizes income statement
relationships.
10. Under the direct write-off method, no attempt is made to
match bad debts expense to sales revenues in the same
accounting period.
11. Allowance for Doubtful Accounts is debited under the direct
write-off method when an account is determined to be
uncollectible.
12. Allowance for Doubtful Accounts is a contra asset account.
13. Cash realizable value is determined by subtracting Allowance
for Doubtful Accounts from Net Sales.
14. Generally accepted accounting principles require that the
direct write-off method be used for financial reporting purposes if
it is also used for tax purposes.
15. Under the allowance method, Bad Debts Expense is debited
when an account is deemed uncollectible and must be written off.
16. Under the allowance method, the cash realizable value of
receivables is the same both before and after an account has
been written off.
17. The percentage of sales basis for estimating uncollectible
accounts always results in more Bad Debts Expense being
recognized than the percentage of receivables basis.
18. An aging schedule is prepared only for old accounts
receivables that have been past due for more than one year.
19. An aging of accounts receivable schedule is based on the
premise that the longer the period an account remains unpaid,
the greater the probability that it will eventually be collected.
20. Sales resulting from the use of VISA and MasterCard are
considered credit sales by the retailer.
21. A factor purchases receivables from businesses for a fee and
collects the remittances directly from customers.
22. A major advantage of national credit cards to retailers is that
there is no charge to the retailer by the credit card companies for
their services.
23.
Receivables may be sold because they may be the only
reasonable source of cash.
24. If a retailer accepts a national credit card such as VISA, the
retailer must maintain detailed records of customer accounts.
25. A note receivable is a written promise by the maker to the
payee to pay a specified amount of money at a definite time.
26. The maturity date of a 1-month note receivable dated June 30
is July 30.
27. The two key parties to a note are the maker and the payee.
28. When the due date of a note is stated in months, the time
factor in computing interest is the number of months divided by
360 days.
29. The accounts receivable turnover ratio is computed by
dividing total sales by the average net receivables during the
year.
30. Both the gross amount of receivables and the allowance for
doubtful accounts should be reported in the financial statements.
Additional True-False Questions
31. Notes receivable represent claims for which formal
instruments of credit are issued as evidence of debt.
32. The two methods of accounting for uncollectible accounts are
(a) percentage of sales and (b) percentage of receivables.
33. The account Allowance for Doubtful Accounts is closed out at
the end of the year.
34. In order to accelerate the receipt of cash from receivables,
owners may sell the receivables to another company for cash.
35. When counting the exact number of days to determine the
maturity date of a note, the date of issue is included but the due
date is omitted.
36. A note is dishonored when it is not fully paid at maturity.
37. Short-term receivables are reported in the current assets
section before temporary investments.
MULTIPLE CHOICE QUESTIONS
38. Claims for which formal instruments of credit are issued as
proof of the debt are
a. accounts receivable.
b. interest receivable.
c. notes receivable.
d. other receivables.
 d. merchandise receivables.
39. Interest is usually associated with
a. accounts receivable. 43. The term "receivables" refers to
b. notes receivable. a. amounts due from individuals or companies.
c. doubtful accounts. b. merchandise to be collected from individuals or companies.
d. bad debts. c. cash to be paid to creditors.
d. cash to be paid to debtors.

40.The receivable that is usually evidenced by a formal 44.A cash discount is usually granted to all of the following except
instrument of credit is a(n) a. retail customers.
a. trade receivable. b. retailers.
b. note receivable. c. wholesalers.
c. accounts receivable. d. All of these are granted discounts.
d. income tax receivable.
45. Which one of the following is not a primary problem
41. Which of the following receivables would not be classified as associated with accounts receivable?
an "other receivable"? a. Depreciating accounts receivable
a. Advance to an employee b. Recognizing accounts receivable
b. Refundable income tax c. Valuing accounts receivable
c. Notes receivable d. Disposing of accounts receivable
d. Interest receivable
42.Notes or accounts receivables that result from sales 46.Trade accounts receivable are valued and reported on the
transactions are often called balance sheet
a. sales receivables. a. in the investment section.
b. non-trade receivables. b. at gross amounts less sales returns and allowances.
c. trade receivables. c. at net realizable value.
d. only if they are not past due.
47.Three accounting issues associated with accounts receivable
are
a. depreciating, returns, and valuing.
b. depreciating, valuing, and collecting. c. recognizing, valuing,
and disposing.
d. accrual, bad debts, and disposing.
48. Which of the following would require a compound journal
entry? a. To record merchandise returned that was previously
purchased on account.
b. To record sales on account.
c. To record purchases of inventory when a discount is offered for
prompt payment. d. To record collection of accounts receivable
when a cash discount is taken.
49. Which of the following would be considered as an unlikely
occurrence?
a. Manufacturer offers a cash discount to a wholesaler.
b. Wholesaler offers a cash discount to a retailer.
c. Retailer offers a cash discount to a customer.
d. All of these are standard practices.
Use the following information for questions 50-51.
A customer charges a treadmill at Hank's Sport Shop. The price
is $2,000 and the financing charge is 9% per annum if the bill is
not paid in 30 days. The customer fails to pay the bill within 30
days and a finance charge is added to the customer's account.
50. What is the amount of the finance charge?
a. $60
b. $15
c. $180
d. $6
51. The accounts affected by the journal entry made by Hank's
Sport Shop to record the
finance charge are a. Accounts Receivable Cash
b. Cash
Finance Receivable
c. Accounts Receivable Interest Payable
d. Accounts Receivable Interest Revenue
52 52. Which of the following practices by a credit card company
results in lower interest charges to the cardholder?
a. The card company states interest as a monthly percentage
rather than an annual percentage.
b. The card company allows a grace period before interest is
accrued. c. The card company allows cardholders to skip
payments on their cards.
d. The card company calculates finance charges from the date of
purchase to the date the amount is paid.
53. If a department store fails to make the entry to accrue the
finance charges due from customers,
a. accounts receivable will be overstated.
b. interest revenue will be understated.
c. interest expense will be overstated. d. interest expense will be
understated.
d. interest expense will be understated.
54. Under the allowance method, writing off an uncollectible
account
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts. d. is not acceptable
practice.
55 55. The net amount expected to be received in cash from
receivables is termed the
a. cash realizable value.
b. cash-good value.
c. gross cash value.
d. cash-equivalent value.
56. If a company fails to record estimated bad debts expense,
a. cash realizable value is understated.
b. expenses are understated.
C. revenues are understated.
d. receivables are understated.
57. Janway sells softball equipment. On November 14, they
shipped $1,000 worth of softball uniforms to Chris Middle School,
terms 2/10, n/30. On November 21, they received an order from
Douglas High School for $600 worth of custom printed bats to be
produced in December. On November 30, Chris Middle School
returned $100 of defective merchandise. Janway has received no
payments from either school as of month end. What amount will
be recognized as net accounts receivable on the Balance Sheet
as of
November 30?
a. $1,600
b. $1,500
c. $1,000 d. $900
58. Larson Company on July 15 sells merchandise on account to
Stuart Co. for $1,000, terms 2/10, n/30. On July 20 Stuart Co.
returns merchandise worth $400 to Larson Company. On July 24
payment is received from Stuart Co. for the balance due. What is
the amount of cash received?
a. $600
b. $588
c. $580
d. $1,000
59. The existing balance in Allowance for Doubtful Accounts is
considered in computing bad debts expense in the
a. direct write-off method.
b. percentage of receivables basis.
c. percentage of sales basis.
d. percentage of receivables and percentage of sales basis.
60.When the allowance method is used to account for
uncollectible accounts, Bad Debts Expense is debited when
a. a sale is made.
b. an account becomes bad and is written off.
c. management estimates the amount of uncollectibles.
d. a customer's account becomes past-due.
Test Bank for Accounting Principles, Eighth Edition
61. When an account becomes uncollectible and must be written
off,
a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debts Expense should be credited.
d. Sales should be debited.
62. The collection of an account that had been previously written
off under the allowance method of accounting for uncollectibles
a. will increase income in the period it is collected.
b. will decrease income in the period it is collected.
c. requires a correcting entry for the period in which the account
was written off. d. does not affect income in the period it is
collected.
63. The percentage of sales basis of estimating expected
uncollectibles
a. emphasizes the matching of expenses with revenues.
b. emphasizes balance sheet relationships.
c. emphasizes cash realizable value.
d. is not generally accepted as a basis for estimating bad debts.
64. An aging of a company's accounts receivable indicates that
$9,000 are estimated to be uncollectible. If Allowance for Doubtful
Accounts has a $1,100 credit balance, the adjustment to record
bad debts for the period will require a
a. debit to Bad Debts Expense for $9,000.
b. debit to Allowance for Doubtful Accounts for $7,900.
c. debit to Bad Debts Expense for $7,900.
d. credit to Allowance for Doubtful Accounts for $9,000.
65. A debit balance in the Allowance for Doubtful Accounts a. is
the normal balance for that account.
b. indicates that actual bad debt write-offs have exceeded
previous provisions for bad debts.
c. indicates that actual bad debt write-offs have been less than
what was estimated. d. cannot occur if the percentage of sales
method of estimating bad debts is used.
66. Under the direct write-off method of accounting for
uncollectible accounts, Bad Debts
Expense is debited
a. when a credit sale is past due.
b. at the end of each accounting period. c. whenever a pre-
determined amount of credit sales have been made.
d. when an account is determined to be uncollectible.
67. An alternative name for Bad Debts Expense is
a. Deadbeat Expense.
b. Uncollectible Accounts Expense.
c. Collection Expense.
d. Credit Loss Expense.
68. A reasonable amount of uncollectible accounts is evidence
a. that the credit policy is too strict.
b. that the credit policy is too lenient.
c. of a sound credit policy.
d. of poor judgments on the part of the credit manager.
69.Bad Debts Expense is considered
a. an avoidable cost in doing business on a credit basis.
b. an internal control weakness.
c. a necessary risk of doing business on a credit basis.
d. avoidable unless there is a recession.
70.The best managed companies will have
a. no uncollectible accounts.
b. a very strict credit policy.
c. a very lenient credit policy.
d. some accounts that will prove to be uncollectible.
71. Two methods of accounting for uncollectible accounts are the
a. allowance method and the accrual method. b. allowance
method and the net realizable method.
c. direct write-off method and the accrual method.
d. direct write-off method and the allowance method.
72. The allowance method of accounting for uncollectible
accounts is required if
a. the company makes any credit sales.
b. bad debts are significant in amount.
c. the company is a retailer.
d. the company charges interest on accounts receivable.
73.Bad Debts Expense is reported on the income statement as
a. part of cost of goods sold. b. reducing gross profit.
c. an operating expense.
d. a contra-revenue account.
74. When the allowance method of accounting for uncollectible
accounts is used, Bad Debts Expense is recorded
a. in the year after the credit sale is made.
b. in the same year as the credit sale.
c. as each credit sale is made.
d. when an account is written off as uncollectible.
75. The method of accounting for uncollectible accounts that
results in a better matching of expenses with revenues is the
a. aging accounts receivable method.
b. direct write-off method.
c. percentage of receivables method. d. percentage of sales
method.
76. To record estimated uncollectible accounts using the
allowance method, the adjusting entry would be a
a. debit to Accounts Receivable and a credit to Allowance for
Doubtful Accounts.
b. debit to Bad Debts Expense and a credit to Allowance for
Doubtful Accounts.
c. debit to Allowance for Doubtful Accounts and a credit to
Accounts Receivable.
d. debit to Loss on Credit Sales and a credit to Accounts
Receivable.
77.Under the allowance method of accounting for uncollectible
accounts,
a. the cash realizable value of accounts receivable is greater
before an account is written off than after it is written off.
b. Bad Debts Expense is debited when a specific account is
written off as uncollectible. c. the cash realizable value of
accounts receivable in the balance sheet is the same before and
after an account is written off.
d. Allowance for Doubtful Accounts is closed each year to Income
Summary.
78. Allowance for Doubtful Accounts on the balance sheet
a. is offset against total current assets.
b. increases the cash realizable value of accounts receivable.
c. appears under the heading "Other Assets."
d. is offset against accounts receivable.
79. When an account is written off using the allowance method,
the
a. cash realizable value of total accounts receivable will increase.
b. total accounts receivable will decrease.
c. allowance account will increase.
d. total accounts receivable will stay the same.
80. If an account is collected after having been previously written
off,
a. the allowance account should be debited.
b. only the control account needs to be credited.
c. both income statement and balance sheet accounts will be
affected.
d. there will be both a debit and a credit to accounts receivable.
81. When an account is written off using the allowance method,
accounts receivable
a. is unchanged and the allowance account increases. b.
increases and the allowance account increases.
c. decreases and the allowance account decreases. d. decreases
and the allowance account increases.
82. Two bases for estimating uncollectible accounts are:
a. percentage of assets and percentage of sales.
b. percentage of receivables and percentage of total revenue.
c. percentage of current assets and percentage of sales. d.
percentage of receivables and percentage of sales.
83. The percentage of receivables basis for estimating
uncollectible accounts emphasizes
a. cash realizable value.
b. the relationship between accounts receivable and bad debts
expense. c. income statement relationships.
d. the relationship between sales and accounts receivable.
84. Long Company uses the percentage of sales method for
recording bad debts expense. For the year, cash sales are
$500,000 and credit sales are $2,000,000. Management
estimates that 1% is the sales percentage to use. What adjusting
entry will Long Company make to record the bad debts expense?
a. Bad Debts Expense
25,000
Allowance for Doubtful Accounts
b. Bad Debts Expense
20,000 87. Under the direct write-off method of accounting for
Allowance for Doubtful Accounts uncollectible accounts a. the allowance account is increased for
20,000 the actual amount of bad debt at the time of
20,000 write-off.
c. Bad Debts Expense Accounts Receivable b. a specific account receivable is decreased for the actual
20,000 amount of bad debt at the
d. Bad Debts Expense....... Accounts Receivable time of write-off.
25,000 c. balance sheet relationships are emphasized.
25,000 d. bad debts expense is always recorded in the period in which
25,000 the revenue was recorded.
85.The balance of Allowance for Doubtful Accounts prior to 88. An aging of a company's accounts receivable indicates that
making the adjusting entry to record estimated uncollectible $4,000 are estimated to be uncollectible. If Allowance for Doubtful
accounts Accounts has a $1,200 credit balance, the adjustment to record
a. is relevant when using the percentage of receivables basis. b. bad debts for the period will require a
is relevant when using the percentage of sales basis. a. debit to Bad Debts Expense for $4,000.
c. is relevant to both bases of adjusting for uncollectible accounts. b. debit to Allowance for Doubtful Accounts for $2,800.
d. will never show a debit balance at this stage in the accounting c. debit to Bad Debts Expense for $2,800. d. credit to Allowance
cycle. for Doubtful Accounts for $4,000.

86.The direct write-off method of accounting for bad debts
a. uses an allowance account.
b. uses a contra-asset account.
c. does not require estimates of bad debt losses.
d. is the preferred method under generally accepted accounting
principles.
89. An aging of a company's accounts receivable indicates that
$3,000 are estimated to be uncollectible. If Allowance for Doubtful
Accounts has a $1,200 debit balance, the adjustment to record
bad debts for the period will require a
a. debit to Bad Debts Expense for $3,000.
b. debit to Bad Debts Expense for $4,200.
c. debit to Bad Debts Expense for $1,800.
d. credit to Allowance for Doubtful Accounts for $4,000.