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

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

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

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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

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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.

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

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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

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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.

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

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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

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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.

A copy of customer's account in the ledger of the bank is called __________.

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. Advice

  4. Balance Statement

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Correct Option: A
Explanation:

Numerous accounts are maintained with the bank viz., current account, savings account,recurring account, etc.

A pass book with the customer is an extract from the ledger maintained by the bank comprising of all the transactions undertaken by the customers during a given period.

Which one of these is true about a 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. It is a part of memorandum statement

  2. It is a part of cash book

  3. If is a part of ledger

  4. It is a part of bank decumentation

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Correct Option: B
Explanation:

Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement. It is normal for a company's bank balance as per the accounting records to differ from the balance as per bank statement due to timing differences. Certain transactions are recorded by the entity that are updated in the bank's system after a certain time lag. Bank reconciliation statement is a part of cash book. The cash book and pass book/bank statement are prepared separately. The businessman prepares the cash book and the pass book is prepared by the bank.

Difference in balance as per pass book and balance as per cash book due to ________ is termed as difference arising due to errors in recording the transaction.

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 issued but not presented for payment

  2. dishonour of a discounted bill

  3. direct payment by the bank/ customers

  4. none of these

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Correct Option: D
Explanation:

It is generally experienced that when a comparison is made between the bank balance as shown in the firm's cash book, the two balances do not tally. Hence, to first ascertain the causes of difference thereof and then reflect them in a statement called Bank Reconciliation Statement to reconcile (tally) the two balances. Reconciliation of the cash book and the bank passbook balances amounts to an explanation of differences between them. The differences between the cash book and bank passbook is caused by:

a. timing differences on recording of the transactions.
b. errors made by the business or by the bank.
Sometimes the difference between the two balances may be accounted for by an error on the part of the bank or an error in the cash book of the business. This causes the difference between the bank balance shown by the cash book and he balance shown by the bank statement. Difference in balance as per pass book and balance as per cash book due to errors committed in recording transaction by the firm and errors committed in recording transactions by the bank are termed as difference arising due to errors in recording the transaction

Entry on credit side of bank 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. cash withdrawn

  2. cash/cheque deposited in bank

  3. business expenses

  4. personal expenses

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Correct Option: B
Explanation:

Any entry on the credit side of the pass book implies that the asset of the account holder( the amount reflecting as his bank balance) has increased and the liability of the bank has increased simultaneously. Now, cash/cheque deposited in bank leads to increase in the bank balance of the account holder and hence would be shown on the credit side of the pass book.