Which of the following is a check that has been paid by the bank during the month? Multiple Choice
A. Dishonored check
B. Canceled check
C. Outstanding check
D. Postdated check
The Correct Answer and Explanation is:
Correct Answer: B. Canceled Check
Explanation
A canceled check is a check that has been paid or cleared by the bank and has been marked as “canceled” so it cannot be used again. Once a check is presented to the bank and the bank pays the specified amount to the payee, it is considered canceled. This process means the funds have been withdrawn from the payer’s account and transferred to the recipient. The canceled check is then recorded in the bank statement as proof of payment during the month.
Let’s review the other options to clarify why they are incorrect:
- Dishonored check: Also known as a bounced check, this is a check that the bank refuses to pay. It is returned unpaid due to insufficient funds, a closed account, or other issues. Since no payment was made, it is not a check that has been paid during the month.
- Outstanding check: This is a check that has been written and recorded in the issuer’s books but has not yet cleared the bank. It means the check has not yet been paid by the bank, so it does not fit the question’s criteria.
- Postdated check: This is a check written with a future date. The bank is not supposed to cash or pay the check until that date arrives. Until then, the check remains unpaid and is not considered in the bank’s monthly payments.
In summary, the only type of check that indicates the bank has completed the payment process during the month is a canceled check. This confirms the transaction was successful, funds were transferred, and the check is no longer valid for further use. It serves as a proper audit trail in both the payer’s and the bank’s records.
