Tag: commercial studies

Quizzes (186) Questions (1136)

Questions Related to commercial studies

Multiple choice 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

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

  1. Pass Book

  2. Cash Book

  3. Advice

  4. Balance Statement
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

Multiple choice 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

Which one of these is true about a 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
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

Multiple choice 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

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.

  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
Reveal answer Fill a bubble to check yourself
D Correct answer
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

Multiple choice 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

Entry on credit side of bank pass book implies ___________.

  1. cash withdrawn

  2. cash/cheque deposited in bank

  3. business expenses

  4. personal expenses
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

Multiple choice 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

A trial balance may agree in case of__________.

  1. wrong balancing of accounts

  2. posting to wrong side of correct a/c

  3. posting correct amount to correct side of wrong a/c

  4. partial omission of the transaction
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A trial balance is a list of the closing balances of all the ledger accounts and usually the first step in the preparation of final accounts. A trial balance may be a test of mathematical accuracy when the debit side equals the credit side. However, it does not necessarily mean that the ledgers are made with accounting accuracy. Thus a trial balance may agree when the debit side equals the crdeit side even if there are some errors. There can be following types of errors:

  1. Error of principle: An error of principle is an error which violates the fundamentals of book keeping. For example, purchase of furniture is debited in the Purchase A/c (Expense A/c) instead of Furniture A/c (Asset A/c), then the debit side of the trial balance will still agree with the credit side but the principles of book keeping will be violated.
  2. Compensatory error: An incorrect debit entry being offset by an equal credit entry or vice versa may allow the trial balance to agree. For example, if one account in the ledger is debited Rs. 100 less and another account in the ledger is credited Rs. 100 less, then these errors will cancel out each other. This means that one error is neutralised by another same error on the opposite side, allowing the trial balance to agree.
  3. Error of omission: If a transaction is completely omitted that is both the aspects of an entry are omitted to be recorded in the double entry book keeping system, the trial balance will still agree.
  4. Error of amount in original book: If an invoice of Rs. 943 has been recorded in the sales book as Rs. 934, the trial balance will come out correctly since the debit and the credit side have been recorded with Rs. 934. Thus, the trial balance will show arithmetical accuracy and will tally in spite of the error.
  5. Posting to wrong account: This means posting an item to the wrong account but on the correct side with correct amount. For example, a purchase of Rs. 500 is credited in the account of Shamu instead of Shama. Such an error will not be deducted by the trial balance and it will still agree.

Multiple choice 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

A Trial balance may not agree in case of_____.

  1. non-recording of a transaction at all

  2. correct amount posted to wrong a/c but correct side

  3. wrong balancing of accounts

  4. entering wrong amount in the subsidiary books
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Error of Omission does not affect Trial Balance.

If amount is posted correctly into wrong account but on the correct side, still it won't affect the Trial Balance since Trial balance is a list of closing balances of all accounts.
But in case of wrong balancing of accounts Trial Balance will not agree because if credit and debit side of an account does not tally, it means some error has taken place.
A wrong amount will not affect Trial Balance since it is made on both the debit and credit side on correct side and in correct account.

Multiple choice 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

On a bank reconciliation which of the following would be added to the balance as per bank statement?

  1. Outstanding unpaid cheques.

  2. Deposits in transit.

  3. Cheques not collected.

  4. Both (B) and (C).
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In case of deposits in transit and cheques not collected , when these items get cleared they lead to increase in the bank balance and at the present moment the pass book balance would be less than the cash book balance.

So, when preparing a bank reconciliation if balance as per bank statement is the starting point then, deposits in transit and cheques not collected would have to be added.

Multiple choice 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

A pass book is copy of ________.

  1. a customers account in the banks books

  2. cash book relating to bank column

  3. cash book relating to cash column

  4. receipts and payments
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bank pass book is 'copy' of a customer's account in bank books.

Several accounts are kept with the bank which are recorded in the bank ledgers.
All the transactions between the customer and bank are recorded in bank ledgers , the extract of which is then availed to customers in form of passbook.

Multiple choice 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

A bank reconciliation statement is prepared with the balances of ________.

  1. cash book

  2. pass book

  3. either cash book or pass book

  4. both cash book and pass book
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Bank Reconciliation statement is prepared in order to reconcile the balance as per the bank pass book and balance as per the cash account maintained by the business in the form of cash book after taking into consideration other aspects like cheques issued but not presented for payment, cash in transit, cheque in transit, etc.

Multiple choice 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

A bank reconciliation is a ____________________.

  1. formal financial statement that lists all of the a firm's bank account balances.

  2. merger of two banks that previously were competitors.

  3. statement sent monthly by a bank to a depositor that lists all deposits, cheques paid and other credits and charges to the depositor's account for the month.

  4. schedule that accounts for differences between a firm's cash balance as shown on bank statement and the balance shown in its personal ledger cash account.
Reveal answer Fill a bubble to check yourself
D Correct answer
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.