Two Months Before Year-End, the Bookkeeper Erroneously Recorded the Receipt

question 25

Multiple Choice

Two months before year-end, the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure for detecting this type of error?

• A)Analysis of the notes payable journal.
• B)Analysis of bank confirmation information.
• C)Preparation of a year-end bank reconciliation.
• D)Preparation of a year-end bank transfer schedule.

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Definitions:

Consumer Credit

A form of credit extended to consumers to finance the purchase of goods or services, often associated with personal loans, credit cards, and lines of credit.

Productive Capacity

The maximum output a business, industry, or economy can produce using all available resources efficiently.

Material Wealth

The quantifiable fiscal assets and possessions owned by an individual or entity, often used as a measure of economic status.

Real Assets

Tangible assets such as land, buildings, and commodities that have intrinsic value due to their physical properties.