AAP ADVANCED STUDY REVISION NOTES Questions with
Correct Answers (Grade A+)
Question 1: Magnetic Ink Character Recognition (MICR).
Answer: A national standard for imprinting checks with machine-readable numbers and characters in
magnetic ink.
Question 2: 1. On-Us Checks 2. Transit Checks.
Answer: Two Basics types of checks in the collection cycle.
Question 3: 1. Funds Service 2. Securities Service.
Answer: Two services provided by Fedwire
Question 4: ACH Network.
Answer:
1. Payment system governed by the ACH Rules
2. UCC 4
3. UCC 4A
4. Electronic Fund Transfer Act
5. OFAC
6. Reg E
7. The Right to Financial Privacy
8. Reg D.
9. and Reg CC.
Question 5: Wire Transfer Payment System.
Answer: Payment system governed by UCC 4A, OFAC, Reg J, and Regulation CC.
Question 6: Card Payment System.
Answer: Payment system governed by the Electronic Fund Transfer Act, Reg Z, Card Association Rules
and Fair Credit Billing
Question 7: Name the clearing and settlement methods for checks.
Answer: 1. Direct Presentment 2. Fed Reserve Bank 3. Clearing House 4. Correspondent Bank.
Question 8: Wire Transfer Payment System.
Answer: Payment system to which real-time, gross settlement applies.
Page 1
,Question 9: Check Payment System.
Answer:
1. Payment system governed by the Expedited Funds Availability Act
2. UCC 3
3. UCC 4
4. OFAC
5. Reg CC and Reg J
Question 10: ACH Network.
Answer: Payment system to which net settlement applies
Question 11: Auxiliary On-Us Field.
Answer: An optional, variable format field of the MICR line of a check.
Question 12: NACHA - The Electronic Payments Association.
Answer: The national trade association for electronic payments, which establishes the rules, industry
standards and procedures governing the exchange of commercial ACH payments by Depository FI.
Question 13: Batch process, store and forward system.
Answer: ACH payment transactions are accumulated throughout the day, sent to the ACH Operator, sorted
by destination and transmitted in groups at specified times.
Question 14: Truncating Bank.
Answer: FI that creates an image of the original check.
Question 15: Reconverting Bank.
Answer: FI that produces the substitute check.
Question 16: Third-Party Service Provider.
Answer: A Third Party that processes ACH Files and/or entries on behalf of the FI and/or Originators
Question 17: Third Party Sender.
Answer: A third-party that provides ACH services to the Originator, and, in that capacity, acts an an
intermediary between the Originator and FI.
Page 2
, Question 18: Third Party Receiving Point.
Answer: A Third-Party that receives ACH files on behalf of the RDFI. Examples include correspondent
banks, corporate credit unions and processors.
Question 19: Third Party Sending Point.
Answer: A third party that sends ACH files on behalf of the ODFI. Examples include correspondent banks,
corporate credit unions and processors.
Question 20: Originators.
Answer: A company or individual that has been authorized by the Receiver to initiate either a credit or debit
ACH entry to their account.
Question 21: Receiver.
Answer: An individual or a company that has authorized the Originator to initiate an ACH entry to their
account with the RDFI
Question 22: Originating Depository Financial Institution (ODFI).
Answer: FI that receives payment instructions from Originators and forwards the entries to the ACH
Operator.
Question 23: Receiving Depository Financial Institution (RDFI).
Answer: FI that receives ACH entries from the ACH Operator and posts the entries to the accounts of its
depositors.
Question 24: ACH Operator.
Answer: The central clearing facility for ACH transactions
Question 25: Card Issuer.
Answer: An entity that issues a credit or debit card to the cardholder.
Question 26: Acquirer/Processor (Merchant Bank or Processor).
Answer: The FI that contracts with a merchant to initiate payment requests to a card association or company
in the context of credit and debit card payments
Question 27: Cardholder.
Answer: A person or entity that is issued a credit or debit account that is accessed through the use of a card.
Page 3
Correct Answers (Grade A+)
Question 1: Magnetic Ink Character Recognition (MICR).
Answer: A national standard for imprinting checks with machine-readable numbers and characters in
magnetic ink.
Question 2: 1. On-Us Checks 2. Transit Checks.
Answer: Two Basics types of checks in the collection cycle.
Question 3: 1. Funds Service 2. Securities Service.
Answer: Two services provided by Fedwire
Question 4: ACH Network.
Answer:
1. Payment system governed by the ACH Rules
2. UCC 4
3. UCC 4A
4. Electronic Fund Transfer Act
5. OFAC
6. Reg E
7. The Right to Financial Privacy
8. Reg D.
9. and Reg CC.
Question 5: Wire Transfer Payment System.
Answer: Payment system governed by UCC 4A, OFAC, Reg J, and Regulation CC.
Question 6: Card Payment System.
Answer: Payment system governed by the Electronic Fund Transfer Act, Reg Z, Card Association Rules
and Fair Credit Billing
Question 7: Name the clearing and settlement methods for checks.
Answer: 1. Direct Presentment 2. Fed Reserve Bank 3. Clearing House 4. Correspondent Bank.
Question 8: Wire Transfer Payment System.
Answer: Payment system to which real-time, gross settlement applies.
Page 1
,Question 9: Check Payment System.
Answer:
1. Payment system governed by the Expedited Funds Availability Act
2. UCC 3
3. UCC 4
4. OFAC
5. Reg CC and Reg J
Question 10: ACH Network.
Answer: Payment system to which net settlement applies
Question 11: Auxiliary On-Us Field.
Answer: An optional, variable format field of the MICR line of a check.
Question 12: NACHA - The Electronic Payments Association.
Answer: The national trade association for electronic payments, which establishes the rules, industry
standards and procedures governing the exchange of commercial ACH payments by Depository FI.
Question 13: Batch process, store and forward system.
Answer: ACH payment transactions are accumulated throughout the day, sent to the ACH Operator, sorted
by destination and transmitted in groups at specified times.
Question 14: Truncating Bank.
Answer: FI that creates an image of the original check.
Question 15: Reconverting Bank.
Answer: FI that produces the substitute check.
Question 16: Third-Party Service Provider.
Answer: A Third Party that processes ACH Files and/or entries on behalf of the FI and/or Originators
Question 17: Third Party Sender.
Answer: A third-party that provides ACH services to the Originator, and, in that capacity, acts an an
intermediary between the Originator and FI.
Page 2
, Question 18: Third Party Receiving Point.
Answer: A Third-Party that receives ACH files on behalf of the RDFI. Examples include correspondent
banks, corporate credit unions and processors.
Question 19: Third Party Sending Point.
Answer: A third party that sends ACH files on behalf of the ODFI. Examples include correspondent banks,
corporate credit unions and processors.
Question 20: Originators.
Answer: A company or individual that has been authorized by the Receiver to initiate either a credit or debit
ACH entry to their account.
Question 21: Receiver.
Answer: An individual or a company that has authorized the Originator to initiate an ACH entry to their
account with the RDFI
Question 22: Originating Depository Financial Institution (ODFI).
Answer: FI that receives payment instructions from Originators and forwards the entries to the ACH
Operator.
Question 23: Receiving Depository Financial Institution (RDFI).
Answer: FI that receives ACH entries from the ACH Operator and posts the entries to the accounts of its
depositors.
Question 24: ACH Operator.
Answer: The central clearing facility for ACH transactions
Question 25: Card Issuer.
Answer: An entity that issues a credit or debit card to the cardholder.
Question 26: Acquirer/Processor (Merchant Bank or Processor).
Answer: The FI that contracts with a merchant to initiate payment requests to a card association or company
in the context of credit and debit card payments
Question 27: Cardholder.
Answer: A person or entity that is issued a credit or debit account that is accessed through the use of a card.
Page 3
