Multiple Choice
Chavez Company most recently reconciled its bank statement. Which of the following items would require an adjustment to the company's cash balance in its accounting records?
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6. Internal Controls and Reporting Cash
Bank Reconciliation
Multiple Choice
In a bank reconciliation, a bank may issue a credit memorandum for which of the following items?
A
A bank service charge assessed for account maintenance
B
A note receivable collected by the bank on behalf of the depositor (including any interest collected)
C
A check written by the depositor that is outstanding at month-end
D
A depositor’s check returned by the bank due to insufficient funds (NSF check)
Verified step by step guidance1
Understand that a credit memorandum in a bank reconciliation represents an amount credited to the depositor's account by the bank, increasing the account balance.
Identify typical reasons for credit memoranda, such as collections made by the bank on behalf of the depositor, including notes receivable and interest collected.
Recognize that bank service charges and NSF checks are usually recorded as debit memoranda because they reduce the account balance.
Note that outstanding checks written by the depositor do not appear on the bank statement and therefore do not generate any memorandum from the bank.
Conclude that the bank issues a credit memorandum when it collects a note receivable or interest for the depositor, increasing the depositor's account balance.
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