Tag: commercial studies

Questions Related to commercial studies

Which of the following is true about 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. Bank reconciliation statement need not to be prepared where the balance of cash book and pass book matches.

  2. Bank reconciliation statement is to be prepared necessarily as per the Income tax Act, 1961.

  3. Bank reconciliation statement is prepared on yearly basis

  4. Bank reconciliation statement is to be prepared and supplied by bank.

Show answer
Correct Option: A
Explanation:

A bank reconciliation statement is prepared to reconcile the differences between the balance as per cash book (bank column) and balance as per pass book (bank statement by identifying the causes of differences between the two. So, in the case where the balance of cash book and pass book matches, it need not be prepared. Also, it is not required to be prepared by any act or the bank. It is prepared by the business (accountant) as per the time period it deems fit.

The difference in the balance of both the cashbook and the passbook can be because 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. Errors in recording the entries either in the cash-book or pass-book

  2. Omission of same entry in both cash-book and pass book

  3. Debit balance of cash book is the credit balance of pass-book

  4. All of the above

Show answer
Correct Option: A
Explanation:

Errors can also be made by the bank and hence it is not necessary only the business preparing cash book shall make errors.

The difference is important to be known between the cash book and pass book to know the errors and frauds during the period in both cash book and pass book.
If something is omitted to be recorded in both the books, it may not be know since there would be not base to reconcile.

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. Cheque deposited into bank and collected by bank

  2. Dishonour of cheques/bill discounted

  3. Cheques received and entered in the cash book deposited into the bank on which bank has collected the amount

  4. All of the above

Show answer
Correct Option: B
Explanation:

Of the given options, event of  dis-honoured cheques and discounting of bill is reflected in the pass book first and not in the cash book since it is dependent on happening of an event.

In case of option (a), the cheque so deposited is first recorded in the cash book and then reflected in bank pass book, in case of option (c), cheques received are first recorded in cash book after which they are deposited into the bank, for which the bank has collected an amount initially, all theses are recorded in cash book after which they are reflected on clearance in the bank pass book.

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. Either (A) or (B)

  4. Both (A) & (B)

Show answer
Correct Option: D
Explanation:

Errors may be committed not only by the firm but also the bank of the account holder. The difference between cash book and pass book can be due to errors in any of these which may not allow them to tally and these errors or frauds may reflect in bank reconciliation statement.

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. Interest credited or debited by bank, not entered in the cash book

  2. Direct collections on behalf of customers

  3. Direct payments made by the bank on behalf of the customers

  4. All of the above

Show answer
Correct Option: D
Explanation:

If anything is left to be entered in the cash book (incomplete recording) , it might not show a true picture and will not lead to tallying of both the books.

Direct transactions of payment or collection are also not reflected in the cash book first but in the bank pass book and hence it would also not lead to tallying of both the books.

A Bank Reconciliation Statement is prepared to know the causes for the difference between ___________________.

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. the balances as per cash column of Cash Book and the Pass Book

  2. the balance as per bank column of Cash Book and the Pass Book.

  3. the balance as per bank column of the Cash Book and balance as per cash column of Cash Book

  4. none of the above

Show answer
Correct Option: B
Explanation:

Bank reconciliation statement is prepared to know the causes of difference between the balance as per bank column of the cash book and the passbook. This is because, both of these accounts show same transactions but with different point of views. The cash book is prepared with the point of view of the customer and the passbook is prepared with the point of view of the bank.

When balance as per pass book is the starting point, interest allowed by bank is _________.

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. added

  2. subtracted

  3. not required to be adjusted

  4. none of the above

Show answer
Correct Option: B
Explanation:

Interest allowed by bank would lead to increase in the bank balance but, it would not be entered in the cash book until and unless the account holder views it in his pass book. 

So when the balance as per pass book is the starting, interest allowed by bank is subtracted in the bank reconciliation statement to reach the cash book balance. 

When drawing up a Bank Reconciliation Statement, if you start with a debit balance as per the Bank Statement, cheques issued but not presented for payment should 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. added

  2. deducted

  3. not required to be adjusted

  4. none of the above

Show answer
Correct Option: A
Explanation:

Debit balance as per bank statement means that it is an bank overdraft and that the cash book would be having a credit  balance. When cheque is issued but not presented for payment, the entry for the same would be credited in the cash book and so the cash book negative balance would increase by that much amount.

So while drawing up a bank reconciliation statement, with debit balance as per bank statement, cheque issued but not presented for payment should be added.

When the balance as per cash book is the starting point, direct deposits by customers are ________.

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. added

  2. subtracted

  3. not required to be adjusted

  4. neither of the two

Show answer
Correct Option: A
Explanation:

Direct deposits by customers lead to increase in the bank balance , but the entry for the same would be entered in the cash book only after the account holder views it in his pass book.

So, when the balance as per cash book is the starting point, direct deposits by customers are added to reach the pass book balance.

The cash book showed an overdraft of Rs. 2000 as 'cash at bank', but the pass book made up to the same date showed that cheques for Rs. 150 and Rs. 125 respectively had not been presented for payment; and the cheque for Rs. 400 paid into account had not been cleared. The balance as per the pass 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. $Rs.1600$

  2. $Rs.2675$

  3. $Rs.2125$

  4. $Rs.1875$

Show answer
Correct Option: D
Explanation:

Cash Book:

Overdraft balance:                                       ($Rs.2,000$)
Less: Cheques not presented for payment   ($Rs.275$)
Add: Cheque not cleared:                                $Rs.400$
Balance as per bank pass book:                ($Rs.1,875$)