Tag: commercial studies

Questions Related to commercial studies

________ is a copy of the clients account in the bank's ledger.

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 book

  2. Pass book

  3. Cheque book

  4. Pay-in-slip book

Show answer
Correct Option: B
Explanation:

The pass book is just a copy of the account statement as maintained by the bank. So if the pass book reflects a debit balance it means that the account is in the nature of a debtor/receivable for the bank and  it would be the opposite for the account holder. From his point of view he would be having a negative balance in his account and hence a liability/payable.

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. Errors committed in recording transactions by the firm.

  2. Errors committed in recording transactions by the bank.

  3. Natural calamities.

  4. Both (A) & (B).

Show answer
Correct Option: D
Explanation:

Banks do commit errors that can cause a difference in balance as per the cash book and the pass book.

Only to reconcile these balances does the businessmen prepare Bank reconciliation.
Majority of the time, there are chances that the fraud and error may be committed by the firm but not always.
Banks may commit errors like printing errors or charging an incorrect bank expense, etc.

A bank statement is a copy of ___________.

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. a customer's account in the bank's book

  2. bank column of the cash book

  3. cash column of the cash book

  4. none of the above

Show answer
Correct Option: A
Explanation:

An extract from bank ledger is a bank statement.

It is customer's copy and shall reflect all the transactions during the period including the bank charges, interest etc.
Even if no transactions have been made, a bank statement shall be processed to show the balance as on date. 

Interest charged by the bank will be deducted, when the overdraft as per the cash book is made the starting point for making, the 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. True

  2. False

Show answer
Correct Option: B
Explanation:

False. Interest charged by bank will be added when the overdraft as per cash book is taken as starting point for preparing the bank reconciliation statement. Interest charged by bank is an expense for the business which reduces the balance as per pass book. The business has not recorded this transaction in the cash book yet as it  has not received any information about it. So, to arrive at the balance as per pass book, it is added to the overdraft balance as per cash book.

Direct collection received by the bank on behalf of its customers will increase the balance as per the Bank Pass-book as 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

Show answer
Correct Option: A
Explanation:

True. Direct collection received by the bank will increase the balance as per pass book as the bank will credit the passbook as the funds are transferred into the customers bank account. This increases the bank passbook balance as compared to cash book balance as the customer has no information about such transaction and has not recorded it in the cash book. This difference in balance arises due to time difference in recording of the transaction.

Collection charges and incidental charges are first reflected in __________.

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. bank statement

  4. none of the above

Show answer
Correct Option: A
Explanation:

Collection charges and incidental charges are the charges levied by the bank for collecting debt for the customer. These expenses are first levied by the bank and then intimated to the customer. Thus, they are first reflected in the pass book.

It is an example of such items which are  often the causes of differences in the balance as per cash book (bank column) and the balance as per pass book (bank statement) as it is reflected at different times at both the places.

When a cheque is deposited ____________ .

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 pass book will be credited

  2. bank pass book will be debited

  3. bank column in cash book is debited

  4. bank column in cash book is credited

Show answer
Correct Option: C
Explanation:

The journal entry in the  books of the account holder when a cheque is deposited is as follows :

Bank A/c. ................................Dr.
To Receivable A/c.
So, as seen from above entry the bank column in the cash book would be debited when a cheque is deposited.

lf a cheque received is further endorsed, it must be entered on both sides of 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

Show answer
Correct Option: A
Explanation:

True. Cash book is debited when cash comes in and credited when cash goes out. So, when we receive the cheque, cash book is debited. And, when we further endorse the cheque, the cash book is credited. Thus, endoresed cheque appears on both sides of the cash book.

Which book of prime entry is also a ledger account?

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 book

  2. journal

  3. purchases journal

  4. sales journal

Show answer
Correct Option: A
Explanation:

Cash book is a unique kind of subsidiary book. It plays a dual role. It acts as the book of original entry or prime entry and also as ledger. It is a subsidiary book because entries are first posted in the cash book and then, from there, it is posted in other ledger accounts.

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. accountant of the business

  2. manager of the business

  3. controller of the bank

  4. accountant of the bank

Show answer
Correct Option: A
Explanation:

A bank reconciliation statement is prepared to reconcile the balnaces as per cash book (bank column) with the balances as per pass book (bank statement). 

It is done by the accountant of the business as it is the business which needs to find the causes of differences between the two balances in order to present a true and fair view of it's financial statements and books of accounts to it's various stakeholders.