Instructions and covered skills
Read each question carefully before selecting an answer. Work from the facts provided rather than making assumptions about missing information. Keep track of whether an item affects the bank balance, the book balance, or both records. Use a calculator or scratch paper for numerical questions when needed. Stay focused and turn off notifications before beginning. Review your selected responses for sign errors, timing differences, and overlooked adjustments before submitting.
Key Areas
This test examines the practical work of reconciling an organization’s cash account to a bank statement. Candidates interpret differences between the statement ending balance and the general ledger cash balance, then determine whether each difference is a timing item, a bank-originated transaction, a company recording error, or a bank error. Key topics include deposits in transit, outstanding checks, electronic funds transfers, bank service charges, interest income, returned customer payments, automatic loan payments, and collection activity performed by the bank.
Strong performance requires knowing which entries belong on the bank side of a reconciliation and which require changes to the book side. Candidates also apply correct additions and deductions, calculate adjusted balances, and prepare journal entries for items the company has not yet recorded. The test addresses error analysis, including incorrect check amounts, posting mistakes, and situations in which the bank has made an error. It also covers the documentation and review practices that support dependable cash controls.
Recommended Preparation
Review a completed bank reconciliation and trace each line to a bank statement, cash ledger, check register, deposit record, or supporting notice. Practice reconciling statement balances using deposits in transit and outstanding checks, then adjust the ledger balance for charges, credits, electronic transactions, and returned payments. Pay close attention to whether an item has already been recorded by the company; recorded timing items normally do not require a journal entry.
Prepare journal entries for common book-side adjustments, including service charges, interest earned, NSF items, and bank collections. Recheck arithmetic by confirming that the adjusted bank balance equals the adjusted book balance. Finally, review cash-control procedures such as timely preparation, independent review, retention of support, sequential check monitoring, and investigation of old outstanding items. These habits help identify errors promptly and strengthen accountability over cash activity.