Bank Reconciliation Statement Test 4

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Bank Reconciliation Statement Test 4

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Question 1
1 / -0

Favourable balance means .

A
Credit balance in the cash book

B
Credit balance in pass book

C
Debit balance in cash book

D
Both (B) and (C)

Solution

The cash book is a account statement as maintained by the account holder. So if the cash book reflects a debit balance it means that the account is in the nature of a debtor/receivable for the account holder and it would be the opposite for the bank.
The pass book is a copy of the account statement as maintained by the bank. So if the pass book reflects a credit balance it means that the account is in the nature of a creditor/payable for the bank and it would be the opposite for the account holder.
So from the account holder's point of view he would be having a positive/favourable balance in his account in both the above situations whereas for the bank it would be the opposite.
Question 2
1 / -0

Unfavourable bank balance means _______________.

A
Credit balance in pass book

B
Debit balance in cash book

C
Debit balance in pass book

D
None of these

Solution

Unfavorable or negative balance means credit balance in cash book. This means that we have taken a loan from the bank i.e. we owe money to the bank. In such a case, the bank expects money from us and we become an asset for the bank. Assets have debit balance. So, the bank shows debit balance in our pass book, which is a copy of customer's account in the books of bank. So, an unfavorable balance in cash book represents debit balance in pass book.
Question 3
1 / -0

A Bank Reconciliation Statement is mainly prepared to ___________.

A
Reconcile the cash balance of the cash book

B
Reconcile the difference between the bank balance shown by the cash book and bank pass book

C
Both (A) and (B)

D
None of the above
Solution
Whenever money is deposited in bank or withdrawn from bank it is recorded in two places.
The passbook maintained by the bank
The cash book (bank column ) 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. Now, it is not practical and feasible for the bank to reconcile the account balances of each and every account holder so, the account holder prepares a bank reconciliation statement for his account maintained in the bank.
Question 4
1 / -0

An extract of customer's account maintained by bank is __________.

A
Cash book

B
Pass book

C
Sales book

D
Purchase book

Solution

Pass book is an important extract of customer's account maintained by the bank which is Account number specific and includes all the transactions made during the period. Pass book shows the details of the transactions and the net balance as on date.
Question 5
1 / -0

Debit balance in bank passbook is called ____________.

A
Debit balance

B
Credit balance

C
Balanced

D
Overdraft

Solution

Bank overdraft is the amount withdrawn by business from bank in excess of deposits up to a prescribed limit. This facility is provided to the current account holders for which the bank charges a certain amount. Bank overdraft is also known as credit balance as per cash book and debit balance as per the pass book.
Question 6
1 / -0

Pass Book is ___________ of account holder's transaction with the Bank.

A
An extract

B
A Balance Sheet

C
A balance

D
A mode

Solution

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.
Question 7
1 / -0

Non-reconciliation of bank balance will result in _______.

A
non-reflection of true balance of cash with bank

B
non-disclosure of true and fair view of profit and loss a/c

C
tax avoidance

D
all the three

Solution

A bank reconciliation statement is a document that matches the cash balance on a company's books to the corresponding amount on its bank statement. Reconciling the two accounts helps to determine if accounting changes are needed. Bank reconciliation are completed at regular intervals to ensure that the company's cash records are correct. They also help detect fraud and any cash manipulations. The reasons for the difference between the balance on the bank statement and the balance on the books include outstanding checks, deposits in transit, bank service charges, check printing charges, errors on the books, errors by the bank, electronic charges on the bank statement not yet recorded on the books, and electronic deposits on the bank statement that are not yet recorded on the books. Non-reconciliation of bank balance results in non-reflection of true balance of cash with bank.
Question 8
1 / -0

Which one of these is true about a bank reconciliation statement?

A
It is a part of memorandum statement

B
It is a part of cash book

C
If is a part of ledger

D
It is a part of bank decumentation

Solution

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.
Question 9
1 / -0

Who prepares the bank reconciliation statement?

A
Business enterprises

B
Statutory Auditor

C
Customer

D
Reserve Bank of India

Solution

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. It is process of matching the balances in a n entity's accounting records for a cash account to the corresponding information on a bank statement. The bank reconciliation statement is prepared by the business enterprises.
Question 10
1 / -0

A bank reconciliation statement is a statement prepared to reconcile ________.

A
Trial balance

B
Profit as per books of account with the profit as per Income-tax returns

C
Cash balance as per cash book with bank balance as per pass book

D
Bank balance as per cash book with bank balance as per bank pass book

Solution

It is generally experienced that when a comparison is made between the bank balance as shown in the firm's cash book and the bank balance shown in the bank book, the two balances do not tally. Hence, we have to ascertain the causes of differences thereof and then reflect them in a statement called Bank Reconciliation Statement to reconcile (tally) the two balances.
In order to prepare a bank reconciliation statement there is a need of bank balance as per the cash book and a bank statement as on particular day along with details of both the books. If the two balances differ, the entries in both the books are compared and the items on account of which the difference has arisen are ascertained with the respective amounts involved so that the bank reconciliation statement may be prepared.

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Bank Reconciliation Statement Test 4

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Question 1

Credit balance in the cash book

Credit balance in pass book

Debit balance in cash book

Both (B) and (C)

Solution

Question 2

Credit balance in pass book

Debit balance in cash book

Debit balance in pass book

None of these

Solution

Question 3

Reconcile the cash balance of the cash book

Reconcile the difference between the bank balance shown by the cash book and bank pass book

Both (A) and (B)

None of the above

Solution

Question 4

Cash book

Pass book

Sales book

Purchase book

Solution

Question 5

Debit balance

Credit balance

Balanced

Overdraft

Solution

Question 6

An extract

A Balance Sheet

A balance

A mode

Solution

Question 7

non-reflection of true balance of cash with bank

non-disclosure of true and fair view of profit and loss a/c

tax avoidance

all the three

Solution

Question 8

It is a part of memorandum statement

It is a part of cash book

If is a part of ledger

It is a part of bank decumentation

Solution

Question 9

Business enterprises

Statutory Auditor

Customer

Reserve Bank of India

Solution

Question 10

Trial balance

Profit as per books of account with the profit as per Income-tax returns

Cash balance as per cash book with bank balance as per pass book

Bank balance as per cash book with bank balance as per bank pass book

Solution

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