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

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

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. Interest credited or debited by bank, not entered in the cash book

  2. Direct collections on behalf of customers

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

  4. All of the above

Show answer
Correct Option: D
Explanation:

If anything is left to be entered in the cash book (incomplete recording) , it might not show a true picture and will not lead to tallying of both the books.

Direct transactions of payment or collection are also not reflected in the cash book first but in the bank pass book and hence it would also not lead to tallying of both the books.

A Bank Reconciliation Statement is prepared to know the causes for the difference between ___________________.

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. the balances as per cash column of Cash Book and the Pass Book

  2. the balance as per bank column of Cash Book and the Pass Book.

  3. the balance as per bank column of the Cash Book and balance as per cash column of Cash Book

  4. none of the above

Show answer
Correct Option: B
Explanation:

Bank reconciliation statement is prepared to know the causes of difference between the balance as per bank column of the cash book and the passbook. This is because, both of these accounts show same transactions but with different point of views. The cash book is prepared with the point of view of the customer and the passbook is prepared with the point of view of the bank.

When balance as per pass book is the starting point, interest allowed by bank 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. none of the above

Show answer
Correct Option: B
Explanation:

Interest allowed by bank would lead to increase in the bank balance but, it would not be entered in the cash book until and unless the account holder views it in his pass book. 

So when the balance as per pass book is the starting, interest allowed by bank is subtracted in the bank reconciliation statement to reach the cash book balance. 

When drawing up a Bank Reconciliation Statement, if you start with a debit balance as per the Bank Statement, cheques issued but not presented for payment should 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. added

  2. deducted

  3. not required to be adjusted

  4. none of the above

Show answer
Correct Option: A
Explanation:

Debit balance as per bank statement means that it is an bank overdraft and that the cash book would be having a credit  balance. When cheque is issued but not presented for payment, the entry for the same would be credited in the cash book and so the cash book negative balance would increase by that much amount.

So while drawing up a bank reconciliation statement, with debit balance as per bank statement, cheque issued but not presented for payment should be added.

When the balance as per cash book is the starting point, direct deposits by customers 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. added

  2. subtracted

  3. not required to be adjusted

  4. neither of the two

Show answer
Correct Option: A
Explanation:

Direct deposits by customers lead to increase in the bank balance , but the entry for the same would be entered in the cash book only after the account holder views it in his pass book.

So, when the balance as per cash book is the starting point, direct deposits by customers are added to reach the pass book balance.

The cash book showed an overdraft of Rs. 2000 as 'cash at bank', but the pass book made up to the same date showed that cheques for Rs. 150 and Rs. 125 respectively had not been presented for payment; and the cheque for Rs. 400 paid into account had not been cleared. The balance as per the pass 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. $Rs.1600$

  2. $Rs.2675$

  3. $Rs.2125$

  4. $Rs.1875$

Show answer
Correct Option: D
Explanation:

Cash Book:

Overdraft balance:                                       ($Rs.2,000$)
Less: Cheques not presented for payment   ($Rs.275$)
Add: Cheque not cleared:                                $Rs.400$
Balance as per bank pass book:                ($Rs.1,875$)

A bank reconciliation statement is prepared with the balance of __________ .

organisation of commerce and management 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 (A) or (B)

  4. neither (A) nor (B)

Show answer
Correct Option: C
Explanation:

To reconcile means to find out the differences if any between two or more things and eliminate it. Now, in case of any banking transactions for each deposit or withdrawal the entry is recorded at two places.

  • The pass book maintained by the bank and
  • The cash book maintained by the account holder.

These two books are opposites of each other which means if one shows credit balance then the other would reflect a debit balance of the exact same amount. But due to reasons like timing differences the balances of both these books do not match. 

So, to reconcile the same a bank reconciliation statement is prepared. The aim while preparing a bank reconciliation statement is to take either pass book or cash book  balance as the starting point, to add or deduct certain entries and reach the balance of the other book ie, if cash book balance is the starting point then after reconciling we should reach at pass book balance.

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point, uncollected cheques are:

organisation of commerce and management 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. None of these

Show answer
Correct Option: B

While preparing a Bank Reconciliation Statement taking the balance as per Cash Book as the starting point unpresented cheque are:

organisation of commerce and management 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. None of these

Show answer
Correct Option: A

The amount withdrawn by the accountholder from his current account in excess of the balance standing in that account upto specified limit is known as 'Bank Overdraft'.

organisation of commerce and management 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