Tag: elements of book keeping and accountancy

Questions Related to elements of book keeping and accountancy

A contra entry in the Cash Book means that:________.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. Debit must be in the Bank Account and the credit in the Cash Account

  2. Debit and credit entries are in any folio but in the Cash Book

  3. Debit and credit entries are on the same folio of the Cash Book

  4. Debit must be in the Cash Account and the credit in the Bank Account

Show answer
Correct Option: C
Explanation:
Contra entry can be:
1.Bank A/c Dr...
To Cash A/c
or
2.Cash A/c Dr...
To Bank A/c
Credit and Debit entries are both taken into consideration into the cash book and not necessarily only bank or only cash entries are reflected.

Bank Reconciliation Statement is prepared to arrive at the Bank Balance.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. Bank reconciliation statement is prepared to Reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of difference between the two for a particular period. it is prepared with the objective of reconciliation and not to arrive at the bank balance.

Bank reconciliation sometimes points to the need for adjusting entries. Invariably how should it be done?

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. The reconciliation of the ending balance per the bank statement to the adjusted cash balance.

  2. The reconciliation of the cash balance per the company records to the adjusted cash balance.

  3. Both a and b

  4. None of the above.

Show answer
Correct Option: A
Explanation:

Bank statement provided by the bank shows the balance as on date.Hence, bank column of cash book might not reflect all the entries as shown in bank pass book since some entries only reflect in bank pass book.Adjustments are made in business's cash book to arrive at the final balance avaialble with the business.

Some of the transaction that is dependent on bank statement are ____________.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. collection charges

  2. dividends received

  3. pre-scheduled payments 

  4. all of the above

Show answer
Correct Option: D
Explanation:
  • Collection charges are directly charged by the bank for providing specified services and this amount is charged  completely on the discretion of the bank. This amount can be recorded in the books of accounts only when we have the bank statement and not before that.
  • In case of  date of declaration of dividend and the date of actual receipt of it there would a difference so we need the bank statement for the actual  date of receipt.
  • Pre-scheduled payments are the expense bills to be paid or subscription to be paid on timely intervals. They are scheduled as per the account holders and are therefore executed by the bank automatically. To record such transactions bank statement/pass book is necessary.

If the balance as per Cash Book and Pass Book are the same, there is no need to prepare a Reconciliation Statement.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Bank reconciliation statement is prepared to reconcile the differences between the balances as per cash book and pass book. If the two balances match, then there is no need for a bank reconciliation statement.

Bank reconciliation statement is not prepared to arrive at the bank balance.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Bank reconciliation statement is prepared to reconcile the balances as per cash book (bank column) and passbook (bank statement) by identifying the causes of differences between the two for a particular period. The bank reconciliation statement is prepared with the objective of reconciling the balances and not arriving at the bank balance.

Banks objective is to ________.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. collect money on behalf of client

  2. give loans to client

  3. accept deposits of clients

  4. all of the above

Show answer
Correct Option: D
Explanation:

A bank is a financial institution that deals in money by lending money and accepting deposits. 

It accepts deposits from customers for a return in the form of interest and then lends this money as loans to various people who are in need of funds. It also performs other funtions such as collecting money on the behalf of it's customers or making payments on the behalf of it's customers.

Bank reconciliation sometimes points to the need for adjusting entries. Invariably how should it be done? 

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. The reconciliation of the ending balance per the bank statement to the adjusted cash balance.

  2. The reconciliation of the cash balance per the company records to the adjusted cash balance.

  3. Both a and b

  4. None of the above

Show answer
Correct Option: A
Explanation:

Bank statement provides balance as on date. But to determine the exact balance available with the business, it is required for business to prepare bank reconciliation statement while making adjustments in the bank column of cash book.

The purpose of preparing a Bank Reconciliation Statement is to ___________.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. ascertain the difference between the pass book balance and the bank statement balance

  2. correct errors in the cash book or errors in the bank statement

  3. amend the balance of the bank statement of the firm

  4. amend the balance of the cash book of the firm

Show answer
Correct Option: B
Explanation:

A bank reconciliation statement is a vital statement for the business.

It is prepared to reconcile the balance as per the bank pass book and the bank column of cash book. The balance as per bank column of cash book of the business does not contain all the entries and hence with the help of bank statement provided by the bank, all the errors are rectified. This gives a true picture of the balance available with the business.

In case of an enterprise having an overdraft facility the bank reconciliation statement treats all the cheques deposited but not cleared in the cash book to be __________.

elements of book keeping and accountancy bank reconciliation statement understand the concept of bank reconciliation statemen bank balance, bank overdraft, meaning, and bank reconciliation statement accounting records

  1. added

  2. deducted

  3. to be revealed only in pass book

  4. to be revealed only in cash book

Show answer
Correct Option: A
Explanation:

Overdraft facility means that the customer is allowed to withdraw money from his bank account even when the balance is zero. However, this does not affect the way in which the cheques deposited but not cleared are recorded in the cash book. Cheques deposited but not cleared are debited in the cash book (bank column). Thus, even in the case of an enterprise having overdraft facility, the bank reconciliation statement treats all the cheques deposited but not cleared as added.