RECORDING FINANCIAL TRANSACTIONS

FIA – FA-1

MULTIPLE CHOICE QUESTIONS

1. Why does a company reconcile its cashbook with the bank statement periodically?

(a) It is a statutory requirement

(b) It speeds up the posting to the accounts
(c) It is a control measure checking for errors and omissions
(d) It enables the business to correct mistakes with the accurate bank records

2. The company’s bank balance recorded in the cashbook is $165.40 in favour of the bank.
Reference to the bank statement shows that a standing order of $10.00 to a supplier has
not been recorded in the cash book but that every other item is the same in both the cash
book and bank statement. The omitted standing order is then included, updating the
cashbook. What are the balances shown in the cashbook bank account and the bank
statement after the updating?

(a) Cash book: Bank $155.40 Cr; Bank statement: Bank $155.40 Dr
(b) Cash book: Bank $155.40 Dr; Bank statement: Bank $155.40 Cr
(c) Cash book: Bank $175.40 Cr; Bank statement: Bank $175.40 Dr
(d) Cash book: Bank $155.40 Dr; Bank statement: Bank $155.40 Cr

3. After checking a company’s cashbook the bank statement, which of the following items
could require an entry in the cashbook?

(i) Bank charges

(ii) A cheque from a customer, which was dishonored
(iii) Cheque not presented
(iv) Deposits not credited
(v) Credit transfer entered in bank statement
(vi) Standing order entered in bank statement

(a) (i), (ii), (v) and (vi) (b) (iii) and (iv)
(c) (i), (iii), (iv) and (vi) (d) (iii), (iv), (v) and (vi)

4. The balance on the book account for a company for a company at the end of May was a
debit of $269.36. It was then discovered on receipt of the bank statement that a standing
order for $40 had been omitted form the cash book and the bank interest on a deposit
account of $15.20 had been credited to the business account. What is the correct balance
on the bank account at the end of May?

(a) $324.56 (b) $294.16

(c) $244.56 (d) $214.16

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5. The bank reconciliation statement of Hall Ltd shows outstanding lodgments of $2,300
and outstanding cheques to suppliers of $2,000. The company’s bank account in the
ledger shows a debit balance at $12,500. What balance does the bank statement of Hall
Ltd show?

(a) $12,200 (b) $12,500

(c) $12,800 (d) $16,800

6. Saira’s records show that her business bank account is overdrawn by $1,000. The balance
on the bank statement is only $500 overdrawn. Assuming there are no errors in the bank
statement, what could account for the difference?

(a) Bank charges of $500 charged by the bank

(b) A decrease in bank overdraft of $500
(c) Unpresented cheques posted to suppliers totaling $500
(d) $500 paid into the bank has yet to be added to the balance

7. You cash book at 31st December 20X3 shows a bank balance of $565 overdrawn. On
comparing this with your bank statement at the same date, you discover the following:

(A) A cheque for $57 drawn by your on 29th December 20X3 has not yet been presented
for payment
(B) A cheque for $92 from a customer, which was paid into the bank on 24 December
20X3, has been dishonoured on 31st December 20X3.

The correct cashbook balance to be shown in the statement of financial position at 31

December 20X3 is:

(a) $714 overdrawn (b) $657 overdrawn

(c) $473 overdrawn (d) $53 overdrawn

8. The general ledger shows a bank balance of $5,675 overdrawn at 31 st August 20X5. It is
subsequently discovered that a standing order for $125 has been entered twice, and that a
dishonored cheque for $450 has been debited in the cash book instead of credited. The
correct bank balance should be:

(a) $5,100 overdrawn (b) $6,000 overdrawn

(c) $6,250 overdrawn (d) $6,450 overdrawn

9. The bank statement on 31st October 20X7 showed an overdraft of $800. On reconciling
the bank statement, it was discovered that a cheque drawn by your business for $80 had
not been presented for payment and that a cheque for $130 from a customer had been
dishonored. The correct bank balance to the shown in the statement of financial position
at 31st October 20X7 is:

(a) $1,010 overdrawn (b) $880 overdrawn

(c) $750 overdrawn (d) $720 overdrawn
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10. Your company’s books at 30th April 20X6 shows a balance at the bank of $2,490.
Comparison with the bank statement at the same date reveals the following differences:

$
Unpresented cheques 840
Bank charges 50
Receipts not yet credited by the bank 470
Dishonored cheques not in cash book 140

The correct balance on the cash book at 30 April 20X8 is:

(a) $1,460 (b) $2,300

(c) $2,380 (d) $3,140

11. Your company’s bank statement at 31st October 20X8 shows a balance of $13,400. You
subsequently discover that the bank has dishonored a customer’s cheque for $300 and has
charged bank charges of $50, neither of which is recorded in your cashbook. There are
unpresented cheques totaling $2,400. Amounts paid in, but not yet credited by the bank,
amount to $1,000. You further discover that an automatic receipt from a customer of
$195 has been recorded as a credit in your cashbook. Your cashbook balance, prior to
correcting the errors and omissions, was:

(a) $11,455 (b) $11,950

(c) $12,000 (d) $12,155

12. Your company’s cashbook shows a credit bank balance of $1,240 at 30 th April 20X9.
Upon comparison with the bank statement, you determine that there are unpresented
cheques totaling $450, and a receipt of $140, which has not yet been passed through the
bank account. The bank statement shows bank charges of $74, which have not been
entered in the cashbook. The balance on the bank statement is:

(a) $1,004 overdrawn (b) $930 overdrawn

(c) $1,475 (d) $1,550

13. Which of the following is not a genuine reason for the cashbook and bank statement
failing to agree?

(a) Timing differences (b) Bank charges

(c) Error (d) Cash receipts posted to creditors

14. The bank statement at 31st December 20X1 shows a balance of $1,000. The cashbook
shows a balance of $750 amount in hand. Which of the following is the most likely
reason for the difference?

(a) Receipt of $250 recorded in the cash book, but not yet recorded by the bank
(b) Bank charges of $250 shown on the bank statement, not in the cash book
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(c) Standing orders of $250 included on the bank statement, not in the cash book
(d) Cheques issued for $250 recorded in the cash book, but not yet gone through the
bank account

15. The cash book balance at 30 November 20X2 shows an overdraft of $500. Cheques for
$6,000 have been paid to suppliers, but do not yet appear on the bank statement. Receipts
of $5,000 are in the cashbook, but are not yet on the bank statement. What is the balance
on the bank statement?

(a) $1,500 overdrawn (b) $500 in hand

(c) $1,500 in hand (d) $500 overdrawn

16. Pike’s bank reconciliation statement shows outstanding lodgments paid in by Pike of
$3,800 and outstanding cheques to suppliers of $3,500. His bank account in his ledger
shows a debit balance of $25,000. What balance does Pike’s bank statement show?

(a) $25,000 (b) $24,700

(c) $25,300 (d) $32,300

17. According to Asif’s records his business bank account is overdrawn by $2,600, yet the
balance shown on his bank statement is only $1,200 overdrawn. Assuming Asif or the
bank has made no errors, what could account for this difference?

(a) Bank interest of $1,400 charged by the bank

(b) Customers’ cheques totaling $1,400 paid into the bank by Arnold
(c) Unpresented cheques posted to supplies totaling $1,400
(d) A $1,400 increase in the business overdraft facility.

18. May’s cashbook shows a month end debit balance of $13,100. Her bank statement,
however, shows a different figure. Mary has identified four differences:

 Bank charges of $950 have been deducted during the last quarter, but not yet
entered in the cash book
 A cheque for $11,600 paid to a creditor has not yet been presented to Mary’s bank
 A customer’s cheque for $6,820 paid into the bank has not yet been cleared
 Mary had forgotten that an annual direct debit of $1,020 was due, and this has
been taken from the account

What is the balance on Mary’s bank statement at the end of the month?

(a) $10,290 (b) $11,130

(c) $15,910 (d) $17,880

19. Which of the following items would you adjust in the cashbook for when preparing a
bank reconciliation statement?

(i) Outstanding deposits

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(ii) Unpresented cheques
(iii) Standing order payment omitted
(iv) Bank charges

(a) (i) and (ii) (b) (i) and (iv)

(c) (i), (ii) and (iv) (d) (iii) and (iv)

20. The balance on the cashbook for a business at the end of June was an overdraft of $89.93.
At that date there were also unpresented cheques totaling $154.38 and an outstanding
deposit of $60? It was also discovered that during the month of June and bank had
charged the business interest on its overdraft for the previous quarter of $16.45. What is
the correct balance on the cash account at the end of June?

(a) $73.48 overdrawn (b) $106.38 overdrawn

(c) $167.86 overdrawn (d) $200.76 overdrawn

21. A company has a debit balance on its cashbook of $148.00 but the bank statement shows
a different balance. The following items have been discovered:

 The bank statement shows that there were bank charges for the period of $10
which have not been recorded in the cash account
 A standing order payment for $25 has also been mistakenly omitted from the cash
account;
 Cheques totaling $125 had been written and posted to suppliers but had not yet
been presented;
 A cheque for $85 had been paid into the bank but was still outstanding.

What is the balance on the bank statement?

(a) $73 (b) $113

(c) $153 (d) $223

22. The bank statement shows an overdraft of $210. Uncleared lodgments are $30 and
unpresented cheques are $83. A dishonored cheque for $28 was included on the bank
statement but has not yet been written into the cashbook. What is the correct cash book
balance?

(a) $263 overdrawn (b) $235 overdrawn

(c) $157 overdrawn (d) $129 overdrawn

23. The bank statement shows a balance at the bank of $1,360, whilst the general ledger
balance on the same date is $1,250. This discrepancy can be explained by:

(a) Uncredited lodgments of $110

(b) Bank charges of $110 not yet recorded in the cash book
(c) Bank interest received of $55 credited in the cash book

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(d) A dishonored cheque for $55 which the business did not know about until it was
returned, after the date of the bank statement

24. At 1st March, the general ledger shows a balance of $850. Transactions during the month
are:
$
Cash sales 230
Credit sales 1,950
Cheques written 1,200
Remittance from debtors 1,500

The cashbook balance at 31st March is:

(a) $1,380 (b) $1,830

(c) $3,100 (d) $3,330

25. Which of the following statements is correct?

Uncredited lodgments:

(a) Constitute an error in the cash book

(b) Constitute an error in the bank statement
(c) Result from the cash book being out of date compared with the bank statement
(d) Result from the bank statement being out of date compared with the cash book

26. How often should a bank reconciliation statement be prepared for a large retail
organization?

(a) Annually (b) Monthly

(c) Daily (d) Weekly

27. Which of the following would affect the bank reconciliation statements?

(a) Dishonoured cheques (b) Discount received

(c) Bank interest (d) Lodgments not presented

28. A cheque appears in the bank statement the same day as it appears in the cashbook. This
happens because:

(a) It has been posted to the payee

(b) It has been used to withdraw cash for wages
(c) It has gone through the bank clearing system
(d) It represents payment to a shopkeeper in a foreign country

29. Which document in a well-run partnership’s business should show the same balance as
recorded in the business cashbook?

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(a) The latest cheque book counterfoil (b) The bank statement
(c) The paying in book (d) The petty cash book

30. Which transaction is recorded in the bank before the business records?

(a) A cashed cheque (b) Payment of a credit card bill

(c) Bank charges (d) A cash sale

31. Which of the following is not a statement, which reconciles or controls?

(a) Bank reconciliation statement (b) Control account

(c) Computerized ledger account (d) Suspense account

32. Which one of the following would not appear in a bank statement?

(a) A credit card purchase (b) A debit card purchase

(c) A BACS transfer to pay wages (d) An EFTPOS transfer for an internet sale

33. Sara calculates her bank balance to be $160 positive, but her bank statement shows a
different amount. Consider the following items and calculate the balance on Sara’s bank
statement.

(i) A cheque that Sara paid into the bank for $400 is still outstanding
(ii) A cheque for $60 paid by Sara to Molly has not yet been presented
(iii) Sara has forgotten to record a cash withdrawal of $30
(iv) Sara’s bank statement shows the bank has deducted charges of $15 from her
account

(a) $95 (b) $135

(c) $185 (d) $225

34. In reconciling a business cashbook with the bank statement, which of the following items
would require an entry in the cashbook?

(1) Cheques presented after the date of the bank statement

(2) A cheque from a customer that has been dishonored
(3) An error by the bank
(4) Bank charges
(5) Deposits credited after the date of the bank statement
(6) Standing order payment entered in the bank statement

(a) Items 2, 3, 4 and 6 only (b) Items 1, 2, 5 and 6 only

(c) Items 2, 4 and 6 only (d) Items 1, 3 and 5 only

35. Don is a trainee accountant. He has made the following attempt at a bank reconciliation
statement.

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$
Overdraft in the bank statement 43,700
Add: deposits not credited by the bank 52,900
96,600
Less: outstanding cheques to suppliers 7,800
Overdraft in the cash book 88,800

What is the correct balance on the cashbook?

(a) $88,800 overdraft as stated (b) $17,000 overdraft

(c) $1,400 overdraft (d) $1,400 cash in bank

Data for question 36-37 is as follows:

The bank statement of a business at 30 June shows a favorable balance of $167. The
following additional information is available:
Cheques totaling $394 sent out by the company before 30 June were not cleared until
July.
Two items on the bank statement had not been recorded in the cashbook: a credit transfer
of 4850 from a customer and bank overdraft interest of $112.
Cheques from customers totaling $643 were paid into the bank on 30th June but were not
cleared until July.

36. It the business prepares a statement of financial position at 30 th, what will be the figure
for cash at bank or bank overdraft?

(a) $416 cash at bank (b) $82 overdraft

(c) $322 overdraft (d) $820 overdraft

37. What was the original (unadjusted) cash book balance as at 30 th June?

(a) $322 debit (b) $322 credit

(c) $416 debit (d) $416 credit

38. A company’s bank statement shows an overdraft of $197 at the end of month. The
statement includes bank charges of $17, which have not yet been recorded in the
company’s cashbook. The statement does not include a cheque for $340 paid to a
supplier, nor an amount of $216 received from a debtor; both of these amounts appear in
the bank statement for month 2. If the company prepares a statement of financial position
at the end of month 1, the figure for the overdraft should be:

(a) $56 (b) $73

(c) $304 (d) $321

39. A company’s bank statement shows an overdraft of $3,204 at 31 st March 19X7. The
statement includes bank charges of $46, which have not yet been recorded in the
company’s cashbook. The statement does not include cheques for $780 paid to supplier,
nor an amount of $370 received from a debtor; both of these amounts appear in the bank
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statement for April 19X7. If the company prepares a statement of financial position at
31st March, the figure for the bank overdraft should be:

(a) $2,748 (b) $2,749

(c) $3,568 (d) $3,614

40. A company’s cash book at 31st December 19X8 shows a debit balance of $2,125. When
the bank statement as at that date is received, it is found that cheques drawn by the
company totalling $274 had not been presented. In addition, the statement recorded bank
charges of $58, which had not been entered in the cashbook. What was the balance on the
bank statement as at 31st December 19X8?

(a) $1,909 overdrawn (b) $1,909 favorable balance

(c) $2,341 favorable balance (d) $2,457 favorable balance

41. A company’s bank statement shows $715 direct debits and $353 investment income not
recorded in the cash book. The bank statement does not show a customer’s cheque for
$875 entered in the cashbook on the last day of the accounting period. If the cashbook
shows a credit balance of $610, what balance appears on the bank statement?

(a) $97 overdrawn (b) $627 overdrawn

(c) $1,123 overdrawn (d) $1,847 overdrawn

42. A company’s cashbook shows a debit balance of $700. The bank statement as at the same
date shows an overdrawn balance of $210. Which one of the following timing differences
could account for the discrepancy?

(a) Cheques drawn but not yet presented amounted to $490

(b) Cheques received but not yet cleared amounted to $490
(c) Cheques drawn but not yet presented amounted to $910
(d) Cheques received but not yet cleared amounted to $910

43. Which of the following does not appear in a bank reconciliation statement?

(a) Unpresented cheques (b) Journal entries

(c) Undeposited receipts (d) Bank error

44. The following attempt at a bank reconciliation statement has been prepared by R Limited

$
Overdraft per bank statement 38,600
Add: deposits not credited 41,200
79,800
Less: outstanding cheques 3,300
Overdraft per cash book 76,500

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Assuming the bank statement balance of $38,600 to be correct, what should be cashbook
balance be?

(a) $76,500 overdrawn, as stated (b) $5,900 overdrawn

(c) $700 overdrawn (d) $5,900 cash at bank

45. A bank reconciliation statement is being prepared. Information is given below:

(1) The closing balance shown by the cash account is $670 overdrawn.
(2) The bank has made a mistake in crediting the account with $110 belonging to
another customer – an error not yet rectified
(3) $120 received by the bank under a standing order arrangement has not been entered
in the cash account
(4) Cheques totaling $5,629 has been drawn entered in the cashbook and sent out to
suppliers but not presented for payment
(5) Cheques totaling $5,577 have been received and entered in the cash account but not
yet credited in the bank statements.

What is the closing balance as shown by the bank statement?

(a) $848 overdrawn (b) $498 overdrawn

(c) $492 overdrawn (d) $388 overdrawn

46. At 31 January 2002 Hugh’s cashbook shows a credit balance of $4,500. Having
compared his cashbook to the bank statements Hugh has found the following:

 Bank charges of $50 have not been recorded in the cashbook

 Cheque payments totaling $850 have not yet been presented for payment at the
bank

What was the balance on Hugh’s bank statement as at 31 January 2002?

(a) $3,700 debit (b) $3,700 credit

(c) $5,400 debit (d) $5,400 credit

47. The cashbook of a business shows a balance of $1,125 overdrawn at 31 May 2002. It is
subsequently discovered that a direct debit of $60 has not been recorded in the cashbook
and that a dishonored cheque of $140 has been entered on the wrong side of the
cashbook. Outstanding cheques at 31 May 2002 amounted to $540. What is the balance
per the bank statement as at 31 May 2002?

(a) $925 overdrawn (b) $2,005 overdrawn

(c) $365 overdrawn (d) $1,445 overdrawn

48. At 31 January 2002 George’s bank statement shows a credit balance of $1,500.
In comparing this with his cashbook George has found the following:

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 Cheque payments amounting to $450 have not yet been presented at the bank for
payment
 Bank charges of $20 have not been recorded in the cash book
 Cheque receipts amounting to $200 are not shown on the bank statement

What amount should appear in Georg’s statement of financial position for cash at
bank?

(a) $1,500 (b) $1,250

(c) $1,750 (d) $1,230

49. The following bank reconciliation statement has been prepared by a trainee accountant:
Bank reconciliation 30 September 2002

$
Bank per bank statement (overdrawn) 36,840
Add: Lodgments credited after date 51,240
88,080
Less: Outstanding cheques 43,620
Balance per cash book (credit) 44,460

Assuming the amounts stated for items other than the cash book balance are correct, what
should the cash book balance be?

(a) $44,460 (b) $60,020 credit

(c) $29,220 debit (d) $29,220 credit

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ANSWER KEY

Questions Answers Questions Answers

1. C 26. C
2. C 27. D
3. A 28. B
4. C 29. A
5. A 30. C
6. C 31. C
7. B 32. A
8. D 33. D
9. B 34. C
10. B 35. D
11. B 36. A
12. A 37. B
13. D 38. D
14. D 39. D
15. B 40. C
16. B 41. D
17. C 42. D
18. C 43. B
19. D 44. C
20. B 45. D
21. C 46. A
22. A 47. A
23. C 48. B
24. A 49. D
25. D

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