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CBSE Questions for Class 10 Elements Of Book Keeping And Accountancy Bank Reconciliation Statement Quiz 2 - MCQExams.com
CBSE
Class 10 Elements Of Book Keeping And Accountancy
Bank Reconciliation Statement
Quiz 2
Favourable bank balance as per the cash book will be less than the bank pass book balance when there are unpresented cheques for payment.
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True
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False
Explanation
True.
Unpresented cheques are cheques issued by the business, but not yet presented for payment at the bank. This reduces the balance in cash book as compared to balance as per pass book. Balance in pass book is effected by the bank only when such cheques are cleared by the bank.
So, favourable bank balance as per cash book will be less than the bank pass book balance when there are in unpresented cheques for payment.
Passbook is the statement of account of the customer maintained by the bank.
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True
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False
Explanation
True. Pass book is a copy of customer's account in the books of the bank. It shows all the transactions of a customer with the bank from the point of view of the bank as it is prepared by the bank.
A bank reconciliation statement is prepared with the balance of __________.
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Pass book
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Cash book
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Both pass book and cash book
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None of the above
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.
Cheques issued but not presented for payment will reduce the balance as per the pass book.
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True
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False
Explanation
False.
Cheque issued but not presented for payment is a cheque which has been written and sent to the suppliers or creditors by the business. However, it has not yet been presented at the bank by the suppliers or creditors. So, the business records such cheques in the cash book before it is recorded in the pass book by the bank.
Thus, such cheques reduce the balance as per cash book and not balance as per pass book.
A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the pass book as these two show different balances for various reasons.
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True
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False
Explanation
True. A business firm periodically prepares bank reconciliation statement to reconcile the balances as per cash book and pass book as it is the responsibility of the business to present a true and fair picture of its
books of accounts to various stakeholders.
The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank.
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True
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False
Explanation
True.
The debit balance of the cash book (bank column) should be equal to the credit balance in the account of the business in the books of the bank (pass book/ bank statement). This is because, pass book (bank statement) is a copy of the customer's account in the books of bank from the point of view of the bank. So our debit balance is shown as credit balance by them.
Favourable balance means
.
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Credit balance in the cash book
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Credit balance in pass book
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Debit balance in cash book
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Both (B) and (C)
Explanation
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.
Unfavourable bank balance means _______________.
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Credit balance in pass book
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Debit balance in cash book
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Debit balance in pass book
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None of these
Explanation
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.
A Bank Reconciliation Statement is mainly prepared to ___________.
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Reconcile the cash balance of the cash book
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Reconcile the difference between the bank balance shown by the cash book and bank pass book
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Both (A) and (B)
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None of the above
Explanation
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.
Overdraft as per the pass book is less than the overdraft as per cash book when there are cheques deposited but not collected by the banker.
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True
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False
Explanation
Cheque deposited but not collected by the banker are the cheques directly received by the bank. Such cheques increases the positive balance in the pass book. This, in turn, reduces the overdraft as per pass book and makes it less than the overdraft as per cash book as such cheques have not been debited in the cash book yet.
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.
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True
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False
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.
State whether the following statement is True or False.
Bank Reconciliation Statement is prepared by the Bank.
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True
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False
Explanation
False. Bank reconciliation statement is prepared by the business firm/ company accountant/ book keeper/ customer and not by the bank as it is the responsibility of the business to present a true and fair picture of its books of accounts to its various stakeholders.
An extract of customer's account maintained by bank is __________.
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Cash book
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Pass book
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Sales book
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Purchase book
Explanation
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.
Debit balance in bank passbook is called ____________.
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Debit balance
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Credit balance
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Balanced
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Overdraft
Explanation
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.
State whether the following statement is True or False.
Overdraft as per pass book means credit balance as per pass book.
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True
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False
Explanation
False. Overdraft means negative balance. Passbook is debited when balance reduces and credited when balance increases. So, overdraft is shown by debit balance in the passbook and not by credit balance.
State whether the following statement is True or False.
Overdraft as per cash book means debit balance as per cash book.
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True
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False
Explanation
False. Overdraft means negative balance. Cash book is debited when cash comes in and credited when cash goes out. So overdraft in cash book is shown by credit balance and not by debit balance.
State whether the following statement is True or False.
Bank Reconciliation Statement is prepared to detect the errors that take place to accounting.
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True
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False
Explanation
False. Bank reconciliation statement is prepared to reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of differences between the two. It, in no way detects the errors that take place in accounting while book keeping.
State whether the following statement is True or False.
Bank balance as per pass book means debit balance as per pass book.
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True
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False
Explanation
False. Bank balance as per pass book means credit balance in the passbook. T
his is because passbook is credited when the balance increases and debited when balance reduces as it is prepared by bank with the bank's point of view. So, unless specified otherwise, bank balance means favourable or credit balance as per passbook.
State whether the following statement is True or False.
Bank reconciliation statement is generally prepared at the end of the year.
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True
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False
Explanation
False. Bank reconciliation statement is prepared periodically. It is generally prepared when the bank statement is received by the business which happens at the end of every month. So, bank reconciliation statement is prepared at the end of every month by the business.
State whether the following statement is True or False.
Bank Reconciliation Statement is prepared at the end of every month.
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True
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False
Explanation
True. Bank reconciliation statement is generally prepared when the bank statement is received, which happens at the end of every month. So it is usually prepared at the end of every month by the company accountant/ book keeper.
State whether the following statement is True or False.
Bank balance as per cash book means debit balance as per cash book.
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True
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False
Explanation
True. Bank balance as per cash book means favourable or debit balance as per cash book. This is because, unless specified otherwise, bank balance represents positive balance in the cash book. Cash book is debited when cash comes in and credited when cash goes out. So, bank balance shows debit or positive balance.
State whether the following statement is True or False.
Bank charges are recorded on the credit side of a cash book.
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True
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False
Explanation
True. Cash book shows the movement of cash from the business's perspective. It is debited when cash comes in and credited when cash goes out. So when bank charges are paid by the customer/ business, he credits the cash book to record the same.
State whether the following statement is True or False.
Debit Balance of Pass Book represents overdrafts
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True
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False
Explanation
True. Debit balance of pass book represents overdraft as we owe money to the bank. Pass book is a copy of the customer's account prepared by the bank with the bank's point of view. So when we owe money to the bank, we become a debtor (asset) for the bank. And, it shows debit balance in our pass book to depict the same.
State whether the following statement is True or False.
Bank overdraft means debit balance of a customer's account with the bank.
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True
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False
Explanation
True. Overdraft balance means debit balance of the customer's account with the bank which is the pass book. Pass book is prepared by the bank. Overdraft balance means we owe money to the bank. So, we become debtor (asset) for the bank. In such a case, bank shows debit balance in our pass book as pass book is prepared from the point of view of the bank in the books of bank.
Pass Book is ___________ of account holder's transaction with the Bank.
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An extract
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A Balance Sheet
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A balance
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A mode
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.
Non-reconciliation of bank balance will result in _______.
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non-reflection of true balance of cash with bank
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non-disclosure of true and fair view of profit and loss a/c
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tax avoidance
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all the three
Explanation
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.
Which one of these is true about a bank reconciliation statement?
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It is a part of memorandum statement
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It is a part of cash book
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If is a part of ledger
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It is a part of bank decumentation
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.
Who prepares the bank reconciliation statement?
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Business enterprises
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Statutory Auditor
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Customer
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Reserve Bank of India
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. 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.
A bank reconciliation statement is a statement prepared to reconcile ________.
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Trial balance
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Profit as per books of account with the profit as per Income-tax returns
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Cash balance as per cash book with bank balance as per pass book
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Bank balance as per cash book with bank balance as per bank pass book
Explanation
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.
Overdraft means ___________ balance of Pass Book.
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Debit
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Credit
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Closing
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Opening
Explanation
A pass book will usually have a credit balance showing the amount of positive closing balance in the account. When the closing balance of the account is negative, it is referred to as overdraft. It is a situation where debit transactions in the account are more than the available balance and hence the closing balance seen is the debit balance and not a credit balance.
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