CHAPTER 5 BANK RECONCILIATION STATEMENT

VERY SHORT ANSWER QUESTIONS:

1. What is passbook?
Ans: Pass book is copy of customer’s A/c as it appears in the ledger of the bank. Bank
gives it to the customer.
2. What is bank overdraft?
Ans: Bank overdraft is a situation where cash withdrawn from the bank is more than the
amount of deposit.
3. Give an example for errors committed by the firm in cash book.
Ans:
• Cheque issued to Mohan Rs. 5000 was recorded as Rs.8000 in cash book ,
• The debit side of cash book was overcast by 1000
4. State any one causes of difference between cash book balance and pass book balance
occurred due to Time difference.
Ans:
• Cheques issued but not presented
• Cheques paid into bank but not yet collected
• Bank charges not recorded in cash book
5. Expand BOD.
Ans: Bank Overdraft
6. Cheques issued but not presented for payment will reduce the balance as per the
passbook. (State true/false) –
Balance in passbook will not reduce until the cheque is actually presented for payment.
7. Cheques deposited but not collected will result in increasing the balance of cash book
when compared to passbook. (State true/false)
8. Overdraft as per the passbook is less than the overdraft as per the cashbook when there
are cheques deposited but not collected by the banker. (State true/false)
9. The bank credits the customer accounts only when the amount of cheques are actually
realized (State true/false)
10. When payments made by the bank as per the standing instruction of the customer the
balance in the passbook will be more when compare to the cash. (State true/false)
TWO MARKS QUESTIONS:
1. What is Bank Reconciliation Statement?
a. Ans: Bank Reconciliation statement is a statement which is prepared to
reconcile ( tally) the bank balance as per cash book with bank balance as per
pass book, by showing the items of difference between the two balances.

2. Why is Bank Reconciliation Statement prepared?

a. Ans: The difference between bank balance as per cash book a bank balance as
per pass book necessitates the preparation of bank reconciliation statement. It
shows the causes of difference which is necessary to reconcile the two
balances.
3. State any two causes for the difference between cash book balance and pass book
balance. Ans:
 • Cheques issued but not presented
• Cheques paid into bank but not yet collected
• Bank charges not recorded in cash book
4. Give any two examples for errors committed by the firm in cash book.
Ans:
• Cheque issued to Mohan Rs. 5000 was recorded as Rs.8000 in cash book
• Cheque received from Mohan Rs. 3900 deposited into bank was recorded in cash
book as Rs. 9300
• The debit side of cash book was overcast by 1000
5. Give any two examples for errors committed by the bank in pass book.
• Cheque deposited into bank for Rs. 5400 was recorded as 4500 in the pass
book
• Cheque issued to Mr. Ram Rs. 8900 was wrongly entered as Rs. 9800 in pass
book
6. What do you understand by the following?
a. Debit balance as per cash book.
Ans: Debit balance as per cash book means balance of deposits held at the bank. ( or
favourable balance as per cash book). Such a balance exists when the deposits made
by the firm are more than its withdrawals.
b. Credit balance as per cash book.
Ans: Credit balance as per cash book indicates bank overdraft ( or unfavourable
balance as per cash book) Such as balance exists when the amount withdrawn is more
than its deposits.
7. What do you understand by the following?
a. Debit balance as per pass book.
Ans: It indicates bank overdraft ( or unfavourable balance as per pass book) it is
excess amount withdrawn over the amount deposited into bank.
b. Credit balance as per pass book
Ans: It means balance of deposits held at the bank ( or favourable balance as per pass
book) such a balance exists when the deposits made by the firm are more than its
withdrawals.
8. What do you understand by the following?
a. Favourable balance as per cash book Ans: It means balance of deposits held
at the bank. It is also known as debit balance as per cash book.
b. Unfavourable balance as per cash book Ans: It indicates bank overdraft. It is
also known as credit balance as per cash book
9. State any two factors which is caused by the time gap in recording the transactions.
Ans:
• Cheques issued but not presented
• Cheques paid into bank but not yet collected
• Bank charges not recorded in cash book
**************