Tag: bank balance, bank overdraft, meaning, and bank reconciliation statement

Questions Related to bank balance, bank overdraft, meaning, and bank reconciliation statement

In bank reconciliation statement the account of outstanding cheques is added to ____  book balance of cash.

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. Adjusted

  2. Unadjusted

  3. Understand

  4. Overstated

Show answer
Correct Option: A
Explanation:

Outstanding cheques are those cheques which have been issued for payment by the business to its suppliers or creditors but have not yet been presented for payment. This means they have been received in the cash book by crediting the cash book. So, in bank reconciliation statement, the account of outstanding cheques is added to adjusted to book balance of cash.

Bank reconciliation statement is prepared on________________.

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. yearly basis from Jan to December

  2. certain period basis

  3. as on particular date

  4. both a & b

Show answer
Correct Option: D
Explanation:

Bank reconciliation statement is a statement prepared by the business to reconcile the differences between the balances as per cash book and pass book on periodic basis. Generally it is done on monthly basis when the business receives the bank statement. It may also be prepared on yearly basis from January to December or some other certain period basis.

Overdraft balance as per cash book will be _________________.

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. shown in minus column of bank reconciliation statement

  2. shown in 'plus' column of bank reconciliation statement

  3. will be carried forward for next period

  4. none of the above

Show answer
Correct Option: B
Explanation:

Overdraft means we have taken a loan from the bank. It is indicated by negative or credit balance in the bank column of the cash book. It is shown in the 'plus' column of the cash book, all the causes of differences are accommodated to arrive at the other balance in order to reconcile the two differences at the time of preparing bank reconciliation statement for a particular period.

The bookkeeper recorded a cheque at Rupees 340.56 for store supplies. The cheque was recorded by the bank at its correct amount of Rupees 430.65. The bank reconciliation will require a/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  balance of cash book

  2. deduction from  balance of cash book

  3. addition to bank statement balance

  4. deduction from bank statement balance

Show answer
Correct Option: B
Explanation:

In the present case the cash book balance is more than the bank statement balance by $Rs. 90.09 (430.65 - 340.56) $ as the payment is recorded at the wrong amount by the book keeper.

So, the bank reconciliation would require deduction of $Rs. 90.09 from the cash book balance.

For the purpose of bank reconciliation statement, only the Rs.column of the cash book is to be considered by the _________.

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

  2. Bank

  3. Cash and Bank

  4. Discount

Show answer
Correct Option: B
Explanation:

'Reconciliation' between the cash book and the bank statement is the purpose of Bank reconciliation.

Entry on the debit side of pass book implies.

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. Withdrawal

  2. Deposit

  3. Expenses

  4. Liability

Show answer
Correct Option: A
Explanation:

'Withdrawal' is money withdrawn by the business from the bank account from the available balance.

Debit side is 'Withdrawal' and credit side is 'Deposit' as per the bank statement/ bank pass book.
A debit entry in bank pass book is a credit entry in the cash book of the business and vice versa.

Which of the following is true about 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. Bank reconciliation statement need not to be prepared where the balance of cash book and pass book matches.

  2. Bank reconciliation statement is to be prepared necessarily as per the Income tax Act, 1961.

  3. Bank reconciliation statement is prepared on yearly basis

  4. Bank reconciliation statement is to be prepared and supplied by bank.

Show answer
Correct Option: A
Explanation:

A bank reconciliation statement is prepared to reconcile the differences between the balance as per cash book (bank column) and balance as per pass book (bank statement by identifying the causes of differences between the two. So, in the case where the balance of cash book and pass book matches, it need not be prepared. Also, it is not required to be prepared by any act or the bank. It is prepared by the business (accountant) as per the time period it deems fit.

The difference in the balance of both the cashbook and the passbook can be because 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. Errors in recording the entries either in the cash-book or pass-book

  2. Omission of same entry in both cash-book and pass book

  3. Debit balance of cash book is the credit balance of pass-book

  4. All of the above

Show answer
Correct Option: A
Explanation:

Errors can also be made by the bank and hence it is not necessary only the business preparing cash book shall make errors.

The difference is important to be known between the cash book and pass book to know the errors and frauds during the period in both cash book and pass book.
If something is omitted to be recorded in both the books, it may not be know since there would be not base to reconcile.

Which of the following is/are cause of difference of balance between cash book & the pass 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. Cheque deposited into bank and collected by bank

  2. Dishonour of cheques/bill discounted

  3. Cheques received and entered in the cash book deposited into the bank on which bank has collected the amount

  4. All of the above

Show answer
Correct Option: B
Explanation:

Of the given options, event of  dis-honoured cheques and discounting of bill is reflected in the pass book first and not in the cash book since it is dependent on happening of an event.

In case of option (a), the cheque so deposited is first recorded in the cash book and then reflected in bank pass book, in case of option (c), cheques received are first recorded in cash book after which they are deposited into the bank, for which the bank has collected an amount initially, all theses are recorded in cash book after which they are reflected on clearance in the bank pass book.

Which of the following is/are cause of difference of balance between cash book & the pass 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. Errors committed in recording transactions by the firm

  2. Errors committed in recording transactions by the bank

  3. Either (A) or (B)

  4. Both (A) & (B)

Show answer
Correct Option: D
Explanation:

Errors may be committed not only by the firm but also the bank of the account holder. The difference between cash book and pass book can be due to errors in any of these which may not allow them to tally and these errors or frauds may reflect in bank reconciliation statement.