Tag: commercial studies

Questions Related to commercial studies

What is true about a reconciliation Statement? It is a 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. sent by the bank when we have made and error

  2. sent by the bank when we the account is overdrawn

  3. drawn up by the bank to verify the cash book

  4. drawn up by us to verify our cash book balance with the bank statement balance

Show answer
Correct Option: D
Explanation:

Bank does not send any statement like a 'reconciliation statement' but only provides a 'bank statement'/ 'bank pass book' which gives us the details of transactions undertaken during the period. In fact, bank reconciliation statement is prepared by the business, only to verify the balance as per bank column of cash book and bank statement.It is an important statement for the business.

Which of the following error results in unadjusted cash book balance?

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. Outstanding cheques

  2. Unpresented cheques

  3. Deposit in transit

  4. Omission of Bank charges

Show answer
Correct Option: D
Explanation:

An unadjusted cash book balance is such balance in which the items only accounted in pass book have not been adjusted yet. 

Omission of bank charges results in unadjusted cash book balance as it has already been accounted in the pass book but not in the cash book.

It is not true for 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. That the bank balance as per cash book and pass book are same.

  2. Prepared on a particular date

  3. A single transaction is recorded both in bank pass book as well as bank cask book

  4. The transaction in the cash book one recorded as per client new point

Show answer
Correct Option: A
Explanation:

Bank reconciliation statement is prepared to to reconcile the balances as per cash book (bank column) and pass book (bank statement) by identifying the causes of differences between the two for a particular period. If the two balances match, then there is no need for bank reconciliation statement. So, it is true for a bank reconciliation statement, that it is prepared on a particular date or a single transaction is recorded both in bank passbook as well as in bank cash book or all that the transaction recorded in cash book is as per the client view point. But, but it is not true for a bank reconciliation statement that the balance as per cash book and passbook are same as when the two balances are same, bank reconciliation statement is not required.

The proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an _________.

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. addition to the balance as per cash book

  2. deduction from the balance as per cash book

  3. deduction from the balance as per pass book

  4. addition to the balance as per pass book

Show answer
Correct Option: A
Explanation:

In case when the bank collects a note for the depositor the entry for the same would have been entered in the bank statement and so the cash book balance would be less than the bank statement balance.

Therefore, the proper treatment on the bank reconciliation of a note collected by the bank for the depositor is to show it as an addition to the balance as per cash book.

In bank reconciliation statement the account of outstanding cheques is added to ____  book balance of cash.

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. Adjusted

  2. Unadjusted

  3. Understand

  4. Overstated

Show answer
Correct Option: A
Explanation:

Outstanding cheques are those cheques which have been issued for payment by the business to its suppliers or creditors but have not yet been presented for payment. This means they have been received in the cash book by crediting the cash book. So, in bank reconciliation statement, the account of outstanding cheques is added to adjusted to book balance of cash.

Bank reconciliation statement is prepared on________________.

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. yearly basis from Jan to December

  2. certain period basis

  3. as on particular date

  4. both a & b

Show answer
Correct Option: D
Explanation:

Bank reconciliation statement is a statement prepared by the business to reconcile the differences between the balances as per cash book and pass book on periodic basis. Generally it is done on monthly basis when the business receives the bank statement. It may also be prepared on yearly basis from January to December or some other certain period basis.

Overdraft balance as per cash book will be _________________.

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. shown in minus column of bank reconciliation statement

  2. shown in 'plus' column of bank reconciliation statement

  3. will be carried forward for next period

  4. none of the above

Show answer
Correct Option: B
Explanation:

Overdraft means we have taken a loan from the bank. It is indicated by negative or credit balance in the bank column of the cash book. It is shown in the 'plus' column of the cash book, all the causes of differences are accommodated to arrive at the other balance in order to reconcile the two differences at the time of preparing bank reconciliation statement for a particular period.

The bookkeeper recorded a cheque at Rupees 340.56 for store supplies. The cheque was recorded by the bank at its correct amount of Rupees 430.65. The bank reconciliation will require a/an ______.

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. addition to  balance of cash book

  2. deduction from  balance of cash book

  3. addition to bank statement balance

  4. deduction from bank statement balance

Show answer
Correct Option: B
Explanation:

In the present case the cash book balance is more than the bank statement balance by $Rs. 90.09 (430.65 - 340.56) $ as the payment is recorded at the wrong amount by the book keeper.

So, the bank reconciliation would require deduction of $Rs. 90.09 from the cash book balance.

For the purpose of bank reconciliation statement, only the Rs.column of the cash book is to be considered by the _________.

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

  2. Bank

  3. Cash and Bank

  4. Discount

Show answer
Correct Option: B
Explanation:

'Reconciliation' between the cash book and the bank statement is the purpose of Bank reconciliation.

Entry on the debit side of 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. Withdrawal

  2. Deposit

  3. Expenses

  4. Liability

Show answer
Correct Option: A
Explanation:

'Withdrawal' is money withdrawn by the business from the bank account from the available balance.

Debit side is 'Withdrawal' and credit side is 'Deposit' as per the bank statement/ bank pass book.
A debit entry in bank pass book is a credit entry in the cash book of the business and vice versa.