FA1 CHAPTER 4

In an accounting system, how are the cash book and the petty cash book classified?

• They are secondary records and not part of the double-entry system.

• They are books of prime entry and are part of the double-entry system.

• They are external documents provided only by the bank.

• They are used only for recording non-cash transactions.

What is the primary purpose of a petty cash book?

• To record large payments made via internet transfer.

• To record the flows of money in the main bank account.

• To record relatively small amounts of cash expenditure such as taxi fares or stationery.

• To track the long-term bank loans of the business.

Which method of bank payment involves the recipient having the right to extract funds directly from the payer's bank account?

• Standing order.

• Internet transfer.

• Cheque.

• Direct debit.

In the context of a cheque, who is defined as the "drawee"?

• The person paying the money (the drawer).

• The institution (bank) on whom the cheque is drawn and the order to pay is given.

• The person who will receive the funds (the payee).

• The employee who prepares the bank reconciliation.

What should be done with cheques that are made out incorrectly and scrapped?

• They should be destroyed immediately so no record remains.

• They should be sent to the bank for investigation.

• They should be marked “VOID” in large letters and kept in the cheque book.

• They should be erased and reused for the next transaction.

What does it mean when a cheque is dishonoured or "bounced" and marked "Refer to Drawer"?

• The bank has successfully transferred the funds to the payee.

• The drawer did not have enough funds in their account to pay the money.

• The cheque has been cleared and the process is complete.

• The payee has forgotten to pay the cheque into their bank.

In a standard "T" account format for a Cash Book, where are receipts and payments recorded?

• Receipts are recorded on the Credit side; Payments on the Debit side.

• Receipts are recorded on the Debit side; Payments on the Credit side.

• Both receipts and payments are recorded on the Debit side.

• Only payments are recorded in the Cash Book.

Why might the cash book balance and the bank statement balance differ?

• Because the bank statement is always wrong.

• Due to timing differences such as unpresented cheques or bank charges not yet recorded in the cash book.

• Because the business does not use the double-entry system.

• Because the petty cash float is too high.

Which of the following best describes a "bank reconciliation"?

• It is a formal part of the double-entry system.

• It is a document sent to customers to request payment for credit sales.

• It is an indispensable part of internal control to ensure the accuracy of cash records by comparing the bank statement with the cash book.

• It is the process of topping up the petty cash float.

How does the "imprest system" for petty cash operate?

• It allows the petty cash balance to accumulate without any limit.

• The balance is topped up to a pre-agreed amount (float) upon presentation of authorized vouchers.

• Vouchers are destroyed as soon as the cash is handed over to employees.

• It is only used for internet transfers from the bank.