Tag: meaning of petty cash book

Questions Related to meaning of petty cash book

A trial balance may agree in case 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. 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

Show answer
Correct Option: C
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.

A Trial balance may not agree in case 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. 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

Show answer
Correct Option: C
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.

On a bank reconciliation which of the following would be added to the balance as per bank 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. Outstanding unpaid cheques.

  2. Deposits in transit.

  3. Cheques not collected.

  4. Both (B) and (C).

Show answer
Correct Option: D
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.

A pass book is 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 customers account in the banks books

  2. cash book relating to bank column

  3. cash book relating to cash column

  4. receipts and payments

Show answer
Correct Option: A
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.

A bank reconciliation statement is prepared with the balances 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. cash book

  2. pass book

  3. either cash book or pass book

  4. both cash book and pass book

Show answer
Correct Option: D
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.

A bank reconciliation is a ____________________.

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. 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.

Show answer
Correct Option: D
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.

Debit balance as per cash book means _________.

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 balance

  2. overdraft

  3. excess of expenditure

  4. none of these

Show answer
Correct Option: A
Explanation:

When we say that cash book has a debit balance it means that the debit side of the cash book is more than the credit side. On the debit side we record cash receipts and on the debit side we record cash payments. So if there is a debit balance as per cash book then it means there is cash balance with us.

A Bank Reconciliation Statement is prepared with the help 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. bank statement and bank column of the cash book

  2. bank statement and cash column of the cash book

  3. bank column and cash column of the cash book

  4. none of the above

Show answer
Correct Option: A
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 / bank statement maintained by the bank and
  • The bank column of 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.

Bank Reconciliation Statement is prepared to ascertain the causes of the difference between ________________ and ______________.

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 balance as per the bank column of the cash book, the balance as per pass book

  2. the balance as per the cash column of cash book, the balance as per the pass book

  3. cash, bank column in the cash book

  4. none of the above

Show answer
Correct Option: A
Explanation:

Bank reconciliation statement is an exercise to ascertain the difference between the bank statements and cash book maintained by the business.

However, any discrepancies in cash column as per the cash book shall not be reflected since only bank column of the cash book is considered vis-a-vis the pass book in preparing Bank reconciliation statement.

The balance of cash book shows ____________.

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. net income

  2. cash in hand

  3. net expenditure

  4. cash received

Show answer
Correct Option: B
Explanation:

Cash book is  maintained to record the cash receipts and cash payments. So if we start with some cash balance in hand then add cash receipts and deduct cash expenses the balance figure what we get is  the cash in hand amount.