22 Error Correction & Bank Reconciliation Practice Questions & Answers

1. 1. A bookkeeper wrote a check for $740 but recorded it in the cash disbursements journal as $470. What type of error is this?

   • A.An omission
   • B.A slide
   • C.A classification error
   • D.A transposition✓ Answer

   A transposition occurs when the digits of an amount are reversed, as when 740 is written 470. The resulting out-of-balance difference of $270 is evenly divisible by 9, which is the arithmetic tell of a transposition or a slide; a slide, by contrast, shifts the decimal point (740 recorded as 74 or 7,400) rather than reordering digits.

   Source: AIPB Certified Bookkeeper, correction of accounting errors — error taxonomy (transposition vs. slide)Report a problem with this question

2. 2. Equipment purchased for $7,300 was recorded in the journal as $730. What type of error is this?

   • A.A compensating error
   • B.An arithmetic footing error
   • C.A slide✓ Answer
   • D.A transposition

   A slide is a decimal-place error: the digits stay in the same order but the amount is shifted one or more places, as when $7,300 becomes $730. A transposition would reorder the digits themselves (for example $3,700). Both make the trial-balance difference divisible by 9, so the digit pattern, not the divisibility, distinguishes them.

   Source: AIPB Certified Bookkeeper, correction of accounting errors — error taxonomy (slide)Report a problem with this question

3. 3. A bookkeeper journalized a $560 advertising invoice as a debit to Utilities Expense and a credit to Accounts Payable. The amount and the debit-credit direction are both correct. What type of error is this?

   • A.An accrual error
   • B.A classification error✓ Answer
   • C.A posting error
   • D.A transposition

   A classification error is the right amount recorded on the right side but in the wrong account, which is exactly what happened when advertising cost was charged to Utilities Expense. A posting error would mean the journal entry itself was correct but was carried to the ledger incorrectly. Because debits still equal credits, this error will not be revealed by the trial balance.

   Source: AIPB Certified Bookkeeper, correction of accounting errors — classification errors vs. posting errorsReport a problem with this question

4. 4. A trial balance does not balance. What does that fact, by itself, tell the bookkeeper?

   • A.That the error must be in the general journal rather than the ledger
   • B.That exactly one error exists in the books
   • C.That every account balance must be recomputed from the source documents
   • D.That at least one error affected debits and credits by unequal amounts, but not how many errors exist or where they are✓ Answer

   An out-of-balance trial balance proves only that one or more errors changed total debits and total credits by different amounts; it gives no count of errors and no location. Several errors can also offset each other, so the size of the difference is not a reliable measure of how much is wrong. The systematic search — re-foot, check normal balances, divide by 2, divide by 9 — is what narrows it down.

   Source: US GAAP double-entry mechanics; AIPB Certified Bookkeeper, using the trial balance to locate errorsReport a problem with this question

5. 5. A trial balance shows total debits of $186,420 and total credits of $193,890, and it lists Accounts Receivable at $830. The difference is $7,470, and $7,470 divided by 9 equals $830. What error does this point to?

   • A.Accounts Receivable was posted in the credit column instead of the debit column
   • B.A transaction of $7,470 was omitted from the journal entirely
   • C.Accounts Receivable of $8,300 was written as $830, a one-place slide✓ Answer
   • D.An $830 journal entry was posted twice to the ledger

   A difference evenly divisible by 9 signals a transposition or a slide, and for a one-place slide the quotient equals the smaller (recorded) amount. Here the quotient $830 matches a balance actually on the trial balance, so the true debit balance was $8,300 and understating it by $7,470 is exactly why credits exceed debits by that amount. A wrong-column posting would instead produce a difference equal to twice the balance.

   Source: AIPB Certified Bookkeeper, trial balance error location — divide-by-9 testReport a problem with this question

6. 6. On a trial balance, total debits exceed total credits by $1,460. The bookkeeper notices that Unearned Service Revenue, a liability with a $730 balance, is listed in the debit column. What does the divide-by-2 test confirm?

   • A.The $730 balance was transposed from $370
   • B.The $730 balance was omitted from the trial balance
   • C.The $730 balance was entered in the wrong column, because listing it as a debit moves the totals by twice its amount✓ Answer
   • D.Two separate errors of $730 each were made

   Placing a credit balance in the debit column removes it from the credit total and adds it to the debit total, so the trial balance is off by two times the amount: $730 x 2 = $1,460. Dividing the difference by 2 and finding a matching balance therefore identifies a wrong-column item. Unearned revenue is a liability and carries a normal credit balance, which is the clue that led to it.

   Source: AIPB Certified Bookkeeper, trial balance error location — divide-by-2 test and normal balancesReport a problem with this question

7. 7. Total debits on a trial balance exceed total credits by $2,150. A review of the general ledger shows a Sales Tax Payable account with a $2,150 credit balance that does not appear anywhere on the trial balance. What is the most likely explanation?

   • A.A compensating error offset the Sales Tax Payable balance
   • B.A transposition of digits in the Sales Tax Payable balance
   • C.The balance was omitted from the trial balance entirely✓ Answer
   • D.The balance was posted to the wrong side of the ledger account

   When the out-of-balance difference equals a single account balance exactly, the standard diagnosis is that the balance was left out of one column of the trial balance. Omitting a $2,150 credit balance understates the credit total by exactly that amount, which is why debits exceed credits by $2,150. A transposition would leave a difference divisible by 9, and a wrong-side posting would double the effect.

   Source: AIPB Certified Bookkeeper, trial balance error location — difference equal to a single balanceReport a problem with this question

8. 8. Which of the following errors would leave a trial balance still in balance?

   • A.A journal entry whose debit was posted but whose credit was never posted
   • B.A $4,300 debit balance that was carried to the trial balance as $3,400
   • C.A $1,300 cash sale that was never journalized or posted at all✓ Answer
   • D.A $500 debit that was posted to the ledger as a credit

   Omitting a transaction entirely removes an equal debit and credit, so the totals still agree and the trial balance cannot detect it. The same is true of an entry posted twice, an entry recorded at the wrong amount on both sides, posting to the wrong account of the same type, and compensating errors. Those errors are found instead through subsidiary-ledger comparison, source-document review, reasonableness scans, and the bank reconciliation.

   Source: AIPB Certified Bookkeeper, errors not revealed by the trial balanceReport a problem with this question

9. 9. On a trial balance, which of the following accounts is listed in the wrong column?

   • A.Prepaid Insurance in the debit column
   • B.Unearned Rent Revenue in the credit column
   • C.Owner's Drawing in the debit column
   • D.Accumulated Depreciation in the debit column✓ Answer

   Accumulated Depreciation is a contra-asset and therefore carries a normal credit balance even though it relates to assets, so it belongs in the credit column. Drawing accounts are normal debit, unearned revenue is a liability with a normal credit balance, and prepaid insurance is an asset with a normal debit balance. Contra accounts such as Accumulated Depreciation and Allowance for Doubtful Accounts are the most commonly misplaced items because their balances look like assets.

   Source: US GAAP normal balances; contra-asset accounts (Accumulated Depreciation, Allowance for Doubtful Accounts)Report a problem with this question

10. 10. A $1,450 purchase of office equipment on account was correctly credited to Accounts Payable but was debited to Supplies Expense. The error is found after posting but before closing. What is the correcting entry?

    • A.No entry is needed because the trial balance still balances
    • B.Debit Office Equipment $1,450, credit Supplies Expense $1,450✓ Answer
    • C.Debit Office Equipment $1,450, credit Accounts Payable $1,450
    • D.Debit Supplies Expense $1,450, credit Office Equipment $1,450

    Only the debit side was wrong, so a single net correcting entry moves the amount out of Supplies Expense and into Office Equipment; reversing and re-recording the whole entry is unnecessary because the credit to Accounts Payable was right. Option c would double the liability. A balanced trial balance is not evidence of correctness, so leaving a classification error uncorrected overstates expense and understates the asset by $1,450 each.

    Source: AIPB Certified Bookkeeper, correcting entries — net correction when only one side is wrongReport a problem with this question

11. 11. A $900 utility bill for the period was received and owed but never recorded. The error is discovered after the books have been closed for that period. What is the correcting entry?

    • A.No entry, because the omission is counterbalancing and self-corrects
    • B.Debit Accounts Payable $900, credit Retained Earnings (owner's capital) $900
    • C.Debit Retained Earnings (owner's capital) $900, credit Accounts Payable $900✓ Answer
    • D.Debit Utilities Expense $900, credit Accounts Payable $900

    Once the books are closed, the expense account for that period has already been closed into equity, so debiting it would push the cost into the wrong period; the correction is made directly to Retained Earnings (or owner's capital) with the liability recorded. Before closing, the same error would simply be fixed by debiting Utilities Expense. The omission also leaves the liability off the books, so it does not correct itself in the balance sheet until an entry is made.

    Source: AIPB Certified Bookkeeper, correcting errors discovered after closing; US GAAP closing processReport a problem with this question

12. 12. A bookkeeper cannot locate the cause of a $310 difference in the trial balance before the reports are due and records the difference in a suspense account. Which statement about that suspense account is correct?

    • A.It must be closed to Bad Debt Expense at period end
    • B.It is a permanent asset account that carries forward to the next period
    • C.It is a temporary holding account that is cleared to zero by the correcting entry once the error is located, and it should not remain in the final statements✓ Answer
    • D.It replaces the need to search for the error because the books now balance

    A suspense account is only a temporary device that lets the books balance while the search continues; it has no economic substance and therefore cannot appear as an asset or liability in the finished statements. When the underlying error is found, the correcting entry debits or credits the proper account and offsets the suspense account, reducing it to zero. Leaving a balance there would misstate the accounts.

    Source: AIPB Certified Bookkeeper, trial balance error location — use and clearing of a suspense accountReport a problem with this question

13. 13. A company made a $4,150 night deposit on the last day of the month, but the deposit does not appear on that month's bank statement. On the bank reconciliation, how is this item handled?

    • A.Deducted from the balance per books; a journal entry crediting Cash is required
    • B.Deducted from the balance per bank statement; no journal entry is required
    • C.Added to the balance per books; a journal entry debiting Cash is required
    • D.Added to the balance per bank statement; no journal entry is required✓ Answer

    A deposit in transit is cash the company has already recorded in its Cash account but that the bank has not yet posted, so the bank column is brought up to date by adding it. Because the books are already correct, no journal entry is ever made for a deposit in transit. All bank-side reconciling items work this way: adjust the bank column only.

    Source: AIPB Certified Bookkeeper, bank reconciliation — bank-side reconciling items (deposits in transit)Report a problem with this question

14. 14. Checks totaling $6,300 were written and mailed to vendors before month end but had not cleared the bank as of the bank statement date. How are these outstanding checks treated on the bank reconciliation?

    • A.Deducted from the balance per bank statement; no journal entry is required✓ Answer
    • B.Added to the balance per bank statement; no journal entry is required
    • C.Deducted from the balance per books; a journal entry crediting Cash is required
    • D.No effect on either side of the reconciliation

    The company already reduced its Cash account when the checks were written, so the books are correct and only the bank balance is overstated relative to reality. Deducting the outstanding checks from the bank statement balance brings that column to the true cash figure, and no journal entry is made. Journal entries arise only from book-side reconciling items.

    Source: AIPB Certified Bookkeeper, bank reconciliation — bank-side reconciling items (outstanding checks)Report a problem with this question

15. 15. The bank statement includes a $95 charge for an annual safe-deposit box rental, but the company does not rent a safe-deposit box at that bank. How should the bookkeeper handle this item?

    • A.Deduct $95 from the balance per bank statement and debit Rent Expense
    • B.Add $95 to the balance per bank statement and notify the bank; no journal entry is made✓ Answer
    • C.Make no adjustment until the bank issues a credit memo next month
    • D.Deduct $95 from the balance per books and debit Miscellaneous Expense

    This is a bank error, not a company transaction, so the company's Cash account is already correct and no journal entry is ever made for it. The bank column is corrected by adding back the amount the bank wrongly deducted, and the bank is notified so it will fix its own records. Candidates commonly want to journalize a bank's mistake, which would misstate Cash.

    Source: AIPB Certified Bookkeeper, bank reconciliation — bank errors are bank-side adjustmentsReport a problem with this question

16. 16. Which of the following reconciling items requires a journal entry on the company's books?

    • A.An outstanding check
    • B.Interest earned on the checking account, reported by a bank credit memo✓ Answer
    • C.A deposit in transit
    • D.A check the bank charged to the company's account in error

    Interest credited by the bank is information the company learns only from the statement, so the books are out of date and must be updated: debit Cash and credit Interest Income. Deposits in transit, outstanding checks, and bank errors are all bank-side items already recorded correctly on the books, so they generate no entry. The rule is simple: every book-side reconciling item requires an entry, and no bank-side item ever does.

    Source: AIPB Certified Bookkeeper, bank reconciliation — book-side items require journal entriesReport a problem with this question

17. 17. A customer's $640 check, deposited earlier in the month, was returned by the bank marked NSF. What entry does the company make?

    • A.No entry; the NSF check is a bank-side reconciling item
    • B.Debit Accounts Receivable $640, credit Cash $640✓ Answer
    • C.Debit Bad Debt Expense $640, credit Cash $640
    • D.Debit Cash $640, credit Accounts Receivable $640

    An NSF check means the customer never actually paid, so the receivable is reinstated: debit Accounts Receivable and credit Cash to remove the deposit that did not hold. It is not bad debt expense, because the account is still considered collectible and, under the allowance method required by GAAP, uncollectible accounts are written off against the allowance rather than expensed directly. The NSF check is a book-side item deducted from the book balance.

    Source: AIPB Certified Bookkeeper, bank reconciliation journal entries — NSF checks reinstate Accounts ReceivableReport a problem with this question

18. 18. The bank statement shows a $200 debit memo consisting of a customer's returned NSF check of $175 plus a $25 NSF handling fee. What is the correct journal entry?

    • A.Debit Cash $200, credit Accounts Receivable $175 and Miscellaneous Expense $25
    • B.Debit Accounts Receivable $175, debit Miscellaneous Expense $25, credit Cash $200✓ Answer
    • C.Debit Miscellaneous Expense $200, credit Cash $200
    • D.Debit Accounts Receivable $200, credit Cash $200

    A combined debit memo must be split by its components, because the two pieces have different natures: the $175 is a receivable that is reinstated against the customer, while the $25 is a bank charge that belongs in expense. One $200 credit to Cash covers the total reduction shown on the statement. Charging the entire $200 to Accounts Receivable would overbill the customer for the bank's fee.

    Source: AIPB Certified Bookkeeper, bank reconciliation journal entries — splitting a combined debit memoReport a problem with this question

19. 19. A credit memo shows that the bank collected a $6,000 note receivable plus $240 of interest for the company and deducted a $30 collection fee, crediting the account for $6,210 net. What entry does the company record?

    • A.Debit Cash $6,240; credit Notes Receivable $6,240
    • B.Debit Cash $6,210; credit Notes Receivable $6,210
    • C.No entry; the collection appears on the bank side of the reconciliation
    • D.Debit Cash $6,210 and Miscellaneous Expense $30; credit Notes Receivable $6,000 and Interest Income $240✓ Answer

    The company learns of the collection only from the bank statement, so this is a book-side item requiring an entry. The credit side must be split because the principal removes the note from the books while the interest is newly earned revenue, and the collection fee is an expense that explains why Cash increased by only $6,210. Debits of $6,210 plus $30 equal credits of $6,000 plus $240.

    Source: AIPB Certified Bookkeeper, bank reconciliation journal entries — note collected by the bank with interestReport a problem with this question

20. 20. Check #418, correctly written for $840 to pay the telephone bill, was recorded in the company's books as $480. How does this affect the bank reconciliation and what entry is required?

    • A.Deduct $360 from the balance per books; debit Telephone Expense $360, credit Cash $360✓ Answer
    • B.Add $360 to the balance per bank statement; no journal entry
    • C.Add $360 to the balance per books; debit Cash $360, credit Telephone Expense $360
    • D.Deduct $840 from the balance per bank statement; no journal entry

    The company took only $480 out of its Cash account when $840 actually left the bank, so the book balance is overstated by $360 and expense is understated by the same $360. The book column is reduced by $360 and the entry debits Telephone Expense and credits Cash. Note the direction reverses if the error runs the other way: a check written for $480 but recorded as $840 would add $360 to the book balance.

    Source: AIPB Certified Bookkeeper, bank reconciliation — company recording errors in the Cash accountReport a problem with this question

21. 21. The balance per bank statement is $27,620. Deposits in transit are $4,150, outstanding checks total $6,300, and the bank charged the company $180 for another firm's check in error. What is the adjusted balance per bank?

    • A.$25,470
    • B.$29,950
    • C.$25,650✓ Answer
    • D.$25,290

    Start with $27,620, add the $4,150 deposit in transit the bank has not yet posted, subtract the $6,300 of checks that have not yet cleared, and add back the $180 the bank wrongly deducted, giving $25,650. The bank error is added because the deduction never should have hit the account. The adjusted balance per bank must equal the adjusted balance per books, and that reconciled figure is the Cash amount reported on the balance sheet.

    Source: AIPB Certified Bookkeeper, bank reconciliation — computing the adjusted balance per bankReport a problem with this question

22. 22. The balance per books is $24,720. During the month the bank collected a $1,000 note receivable plus $60 of interest, charged a $35 service fee, returned a customer's $520 NSF check with a $25 fee, and check #244, correctly written for $270, was recorded in the books as $720. What is the adjusted balance per books?

    • A.$24,750
    • B.$25,650✓ Answer
    • C.$25,200
    • D.$26,740

    Take $24,720, add the $1,000 note and $60 interest the bank collected, subtract the $35 service charge, subtract $545 for the NSF check and its fee, and add $450 because the check was recorded $450 higher than it was written, giving $25,650. The recording error is added back since overstating a disbursement understated the book cash balance. Every one of these book-side items also requires a journal entry, after which the ledger Cash balance equals $25,650 exactly.

    Source: AIPB Certified Bookkeeper, bank reconciliation — computing the adjusted balance per booksReport a problem with this question

Practice questions based on the subject areas of the AIPB Certified Bookkeeper designation, US GAAP, and federal payroll practice. Tax rates, wage bases, contribution limits and withholding tables are reset annually and unemployment and wage-and-hour rules differ by state, so no such figure is used as an answer here — where a calculation needs one, the question supplies it. Confirm the rates in effect for your payroll period and your state's requirements before applying anything here to real books. AIPB and Certified Bookkeeper are marks of the American Institute of Professional Bookkeepers; this site is not affiliated with or endorsed by the AIPB. About the Certified Bookkeeper exam →