Multiple Choice
What is a potential consequence of not regularly monitoring your bank account as part of the bank reconciliation process?
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6. Internal Controls and Reporting Cash
Bank Reconciliation
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What is the typical result when John overdraws his checking account during the bank reconciliation process?
A
John receives interest income on the overdrawn amount.
B
A bank service charge or overdraft fee is assessed to his account.
C
The overdraft is ignored and not reflected in the bank statement.
D
The bank automatically increases his account balance.
Verified step by step guidance1
Understand the concept of overdrawing a checking account: Overdrawing occurs when the account holder withdraws more money than is available in their account balance.
Review the typical bank response to overdrafts: Banks usually assess a service charge or overdraft fee to the account holder for exceeding their available balance.
Analyze the options provided in the problem: Evaluate each statement to determine which aligns with standard banking practices during the reconciliation process.
Eliminate incorrect options: For example, banks do not typically provide interest income on overdrawn amounts, ignore overdrafts, or automatically increase the account balance.
Conclude that the correct response is that a bank service charge or overdraft fee is assessed to John's account, as this reflects standard banking procedures.
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