Tag: commercial studies

Questions Related to commercial studies

A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the pass book as these two show different balances for various reasons.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. A business firm periodically prepares bank reconciliation statement to reconcile the balances as per cash book and pass book as it is the responsibility of the business to present a true and fair picture of its books of accounts to various stakeholders.

When payments made by the bank as per the standing instructions of the customer, the balance in the pass book will be more when compared to the cash book. 

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. When payments are made by the bank on behalf of the customer, the bank will reduce the balance in the pass book. However, the customer will be able to reduce the balance in the cash book only when he receives information about the same. Thus the balance in cash book will be more than the pass book. This difference arises only because of time difference in recording of the transaction.

Direct collections received by the bank on behalf of the customers would increase the balance as per the bank pass book when compared to the balance as per the cash book. 

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. 

Direct collections received by the bank on behalf of the customer would increase the balance as per the bank pass book as compared to cash book balance as the bank would have credited the amount to the bank account of the customer. 

However, the customer will increase the balance in the cash book only when he will receive the information about such transaction. Thus, here difference arise due to time difference in the recording of the transaction.

Differences caused by errors are ___________.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. interest and dividends collected by the bank

  2. errors committed in recording transaction by the firm

  3. direct payments made by the bank on behalf of the customers

  4. errors committed in recording transactions by the bank

Show answer
Correct Option: B,D
Explanation:

A bank reconciliation statement compares the balances of cash book which is prepared by the firm and the pass book which is prepared by the bank. It is prepared to identify the errors and differences between the two balances. Thus differences caused by errors are either errors committed in recording transactions by the firm or errors committed in recording transactions by the bank.

When the balance as per Cash Book is the starting point, direct deposit by customer is_______________.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance bank overdraft meaning and bank reconciliation statement

  1. Added

  2. Subtracted

  3. Not required to be adjusted

  4. Neither of the two

Show answer
Correct Option: A
Explanation:

A direct deposit is a deposit which is directly made into the bank account without recording it in the cash book. So the balance as per pass book increases as compared to the balance as per cash book. Thus, when balance as per cash book is the starting point, a direct deposit is added to arrive at the balance as per pass book.

How many ways are there to prepare Bank Reconciliation Statement?

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. Three

  2. Two

  3. One

  4. Five

Show answer
Correct Option: B
Explanation:

There are three(3) ways to prepare the bank reconciliation namely:

  1. Take the book balance and reconcile it to the bank balance
  2. Take the bank balance and reconcile it to the book balance
  3. Take the book balance and reconcile it to an adjusted cash balance, then take the bank balance and reconcile it to the adjusted cash balance

A Bank Reconciliation Statement is prepared by ______.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. Bank

  2. Creditors

  3. Debtors

  4. Business Firm

Show answer
Correct Option: D
Explanation:

A bank reconciliation statement is a reconciliation statement between the balances of cash book (bank column) and pass book (bank statement). It is prepared by the business firm to identify and adjust the causes of differences between the two balances.

A Bank Reconciliation Statement is prepared with the help of _____________.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance bank overdraft meaning and bank reconciliation statement

  1. Cash Book

  2. Pass Book

  3. Either Cash Book or Pass Book

  4. Neither Cash Book or Pass Book

Show answer
Correct Option: C
Explanation:

A bank reconciliation statement is prepared to reconcile the differences between the balances as per cash book (bank balance) and pass book (bank statement). It is prepared by taking any of the two balances as the base, accommodating all the causes of differences and finally arriving at the other balance. Thus it is prepared with the help of either cash book or pass book depending on whose balance we take as the base.

State whether the following statement is True or False.
Bank reconciliation statement is prepared by the Account holder.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Bank reconciliation statement is prepared by the account holder / business firm/ company and not any third party or the bank as it is the responsibility of the business firm/ company to present a true and fair picture of its books of accounts to its various stakeholders.

Pass Book is ___________ of account holder's transaction with the Bank.

commercial studies cash book and bank related transactions objectives and importance of bank reconciliation statement meaning of petty cash book bank balance, bank overdraft, meaning, and bank reconciliation statement

  1. An extract

  2. A Balance Sheet

  3. A balance

  4. A mode

Show answer
Correct Option: A
Explanation:

Balance Sheet of a bank is a collation of any accounts maintained by the customers, hence pass book can never be a balance sheet neither can it be a balance. 'Mode' can be online banking or offline banking and has nothing to do with the pass book.

Pass book is only an extract of all the transactions undertaken by the customers during the period.