Multiple Choice
What is the typical result when John overdraws his checking account during the bank reconciliation process?
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6. Internal Controls and Reporting Cash
Bank Reconciliation
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Which of the following is an advantage of using automatic withdrawal to pay bills?
A
It eliminates the need to monitor your bank account for unauthorized transactions.
B
It reduces the risk of missing payment due dates.
C
It guarantees that all errors in billing will be automatically corrected.
D
It increases the likelihood of overdraft fees.
Verified step by step guidance1
Understand the concept of automatic withdrawal: Automatic withdrawal is a process where funds are automatically deducted from a bank account to pay bills on a scheduled basis.
Evaluate the advantages of automatic withdrawal: One key advantage is that it helps ensure bills are paid on time, reducing the risk of missing payment due dates.
Analyze the incorrect options: Automatic withdrawal does not eliminate the need to monitor your bank account for unauthorized transactions, nor does it guarantee that billing errors will be automatically corrected.
Consider potential disadvantages: Automatic withdrawal may increase the likelihood of overdraft fees if the account balance is insufficient to cover the payment.
Conclude the correct answer: The primary advantage of automatic withdrawal is its ability to reduce the risk of missing payment due dates, ensuring timely payments.
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