Question

a company writes a check but does not have enough money to cover the balance. what is the journal entry for the charge assessed by the bank?

credit service charge fee and debit cash
debit expenses and credit cash
debit service charge fee and credit cash
credit expenses and debit cash

question 10 (10 points)
an employee has been stealing funds from the company for years. which of the following control methods would have most likely uncovered this sooner?

set-up a petty cash fund
complete a bank reconciliation
audit the supply account
close a petty cash fund

Explanation:

Analyze the first question regarding bank service charges

The first question asks for the journal entry when a bank assesses a charge for a check written with insufficient funds (often called a non-sufficient funds or NSF fee, or a bank service charge).

• When the bank charges a fee, the company incurs an expense. Expenses are increased with a debit. Therefore, we debit an expense account, specifically "Service Charge Fee" (or Bank Service Charge Expense).
• Since the bank automatically deducts this fee from the company's bank account, the company's cash balance decreases. Cash is an asset, which decreases with a credit. Therefore, we credit "Cash".
• Combining these, the correct journal entry is: Debit Service Charge Fee and Credit Cash.

Analyze the second question regarding internal controls

The second question asks which control method would most likely uncover an employee stealing funds from the company for years.

• "Set-up a petty cash fund" and "Close a petty cash fund" are related to managing small, routine cash disbursements, but they do not serve as a broad control to detect long-term systemic theft of general company cash.
• "Audit the supply account" focuses on physical inventory or supplies, not general cash funds.
• "Complete a bank reconciliation" compares the bank's record of cash with the company's ledger. This process is one of the most critical internal controls for cash because it ensures all cash inflows and outflows recorded by the bank match the company's books, making unexplained discrepancies or unauthorized withdrawals (theft) highly visible. Thus, bank reconciliation is the most effective method listed to uncover cash theft.

Answer:

Question 1

• Credit Service Charge Fee and Debit Cash
• Debit Expenses and Credit Cash
• Debit Service Charge Fee and Credit Cash (Correct answer)
• Credit Expenses and Debit Cash

Question 2

• Set-up a petty cash fund
• Complete a bank reconciliation (Correct answer)
• Audit the supply account
• Close a petty cash fund