Tag: cash book and bank related transactions

Questions Related to cash book and bank related transactions

Direct collection received by the bank on behalf of its customers will increase the balance as per the Bank Pass-book as 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 collection received by the bank will increase the balance as per pass book as the bank will credit the passbook as the funds are transferred into the customers bank account. This increases the bank passbook balance as compared to cash book balance as the customer has no information about such transaction and has not recorded it in the cash book. This difference in balance arises due to time difference in recording of the transaction.

Collection charges and incidental charges are first reflected in __________.

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. pass book

  2. cash book

  3. bank statement

  4. none of the above

Show answer
Correct Option: A
Explanation:

Collection charges and incidental charges are the charges levied by the bank for collecting debt for the customer. These expenses are first levied by the bank and then intimated to the customer. Thus, they are first reflected in the pass book.

It is an example of such items which are  often the causes of differences in the balance as per cash book (bank column) and the balance as per pass book (bank statement) as it is reflected at different times at both the places.

When a cheque is deposited ____________ .

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 pass book will be credited

  2. bank pass book will be debited

  3. bank column in cash book is debited

  4. bank column in cash book is credited

Show answer
Correct Option: C
Explanation:

The journal entry in the  books of the account holder when a cheque is deposited is as follows :

Bank A/c. ................................Dr.
To Receivable A/c.
So, as seen from above entry the bank column in the cash book would be debited when a cheque is deposited.

lf a cheque received is further endorsed, it must be entered on both sides of 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. Cash book is debited when cash comes in and credited when cash goes out. So, when we receive the cheque, cash book is debited. And, when we further endorse the cheque, the cash book is credited. Thus, endoresed cheque appears on both sides of the cash book.

Which book of prime entry is also a ledger account?

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. journal

  3. purchases journal

  4. sales journal

Show answer
Correct Option: A
Explanation:

Cash book is a unique kind of subsidiary book. It plays a dual role. It acts as the book of original entry or prime entry and also as ledger. It is a subsidiary book because entries are first posted in the cash book and then, from there, it is posted in other ledger accounts.

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. accountant of the business

  2. manager of the business

  3. controller of the bank

  4. accountant of the bank

Show answer
Correct Option: A
Explanation:

A bank reconciliation statement is prepared to reconcile the balnaces as per cash book (bank column) with the balances as per pass book (bank statement). 

It is done by the accountant of the business as it is the business which needs to find the causes of differences between the two balances in order to present a true and fair view of it's financial statements and books of accounts to it's various stakeholders.

What is true about a reconciliation Statement? It is a 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. sent by the bank when we have made and error

  2. sent by the bank when we the account is overdrawn

  3. drawn up by the bank to verify the cash book

  4. drawn up by us to verify our cash book balance with the bank statement balance

Show answer
Correct Option: D
Explanation:

Bank does not send any statement like a 'reconciliation statement' but only provides a 'bank statement'/ 'bank pass book' which gives us the details of transactions undertaken during the period. In fact, bank reconciliation statement is prepared by the business, only to verify the balance as per bank column of cash book and bank statement.It is an important statement for the business.

Which of the following error results in unadjusted cash book balance?

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. Outstanding cheques

  2. Unpresented cheques

  3. Deposit in transit

  4. Omission of Bank charges

Show answer
Correct Option: D
Explanation:

An unadjusted cash book balance is such balance in which the items only accounted in pass book have not been adjusted yet. 

Omission of bank charges results in unadjusted cash book balance as it has already been accounted in the pass book but not in the cash book.

It is not true for 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. That the bank balance as per cash book and pass book are same.

  2. Prepared on a particular date

  3. A single transaction is recorded both in bank pass book as well as bank cask book

  4. The transaction in the cash book one recorded as per client new point

Show answer
Correct Option: A
Explanation:

Bank reconciliation statement is prepared to to reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of differences between the two for a particular period. If the two balances match, then there is no need for bank reconciliation statement. So, it is true for a bank reconciliation statement, that it is prepared on a particular date or a single transaction is recorded both in bank passbook as well as in bank cash book or all that the transaction recorded in cash book is as per the client view point. But, but it is not true for a bank reconciliation statement that the balance as per cash book and passbook are same as when the two balances are same, bank reconciliation statement is not required.

The proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an _________.

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. addition to the balance as per cash book

  2. deduction from the balance as per cash book

  3. deduction from the balance as per pass book

  4. addition to the balance as per pass book

Show answer
Correct Option: A
Explanation:

In case when the bank collects a note for the depositor the entry for the same would have been entered in the bank statement and so the cash book balance would be less than the bank statement balance.

Therefore, the proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an addition to the balance as per cash book.