Chapter bank-reconciliation-statement: Bank Reconciliation Statement Short Questions | accountancy Class 11 CBSE

Chapter bank-reconciliation-statement: Bank Reconciliation Statement Short Questions | accountancy Class 11 CBSE | ByteNotes.in

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Question 1

Quick Recall

What is a Bank Reconciliation Statement?

It is a statement prepared to reconcile the bank balance as per the cash book with the balance as per the bank passbook or bank statement.
It lists all the items of difference between the two balances, explaining why they do not tally on a particular date.
It is prepared by the account holder of the firm, not by the bank, using both the cash book and the passbook.

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Question 2

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Why is a Bank Reconciliation Statement prepared?

It is prepared because the bank balance as per the cash book and the bank passbook usually do not tally due to timing differences or errors.
It helps the firm identify the causes of difference between the two balances so that appropriate corrective action can be taken.
It acts as an internal control mechanism that helps detect errors or frauds in the recording of bank transactions.

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Question 3

Quick Recall

What is a bank passbook?

A bank passbook is a copy of the customer's account as it appears in the ledger of the bank.
It shows all deposits in the credit column and all withdrawals in the debit column, reflecting the bank's perspective.
It enables the bank customer to check their funds regularly and update their own records of transactions.

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Question 4

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Explain the meaning of 'favourable balance as per cash book'.

A favourable balance as per cash book means a debit balance in the bank column of the cash book, indicating that deposits exceed withdrawals.
It shows that the firm has money with the bank and is in a positive financial position with respect to its bank account.
The corresponding entry in the bank passbook would be a credit balance, as the bank owes this amount to the firm.

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Question 5

Quick Recall

What is a bank overdraft? How is it shown in the cash book and passbook?

A bank overdraft is a situation where the firm's withdrawals from the bank exceed its deposits, resulting in a negative bank account balance.
In the cash book, it appears as a credit balance in the bank column, which is an unfavourable or negative balance.
In the bank passbook, it is shown as a debit balance (sometimes followed by Dr. or OD), indicating the firm owes money to the bank.

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Medium

Question 6

Quick Recall

How do cheques issued but not presented for payment cause a difference between cash book and passbook balances?

When a firm issues a cheque, it is immediately recorded on the credit side of the cash book, reducing the cash book balance.
However, the bank only debits the firm's account when the cheque is actually presented for payment, which may take several days.
During this time lag, the cash book shows a lower balance than the passbook, causing a difference between the two.

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Question 7

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How do cheques deposited but not yet collected cause a difference between cash book and passbook?

When a firm deposits a cheque received from a debtor, it is immediately recorded on the debit side of the cash book, increasing the cash book balance.
The bank, however, credits the firm's account only after the cheque is actually cleared and the amount is realised, which may take a few days.
Until the cheque is collected, the passbook balance is lower than the cash book balance, resulting in a difference between the two.

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Medium

Question 8

Quick Recall

What are direct debits made by the bank? Give two examples.

Direct debits are amounts deducted by the bank from the firm's account for various services or charges without the firm's immediate knowledge.
The firm comes to know about these deductions only when it receives the bank statement, so no entry is made in the cash book at the time of deduction.
Examples include cheque collection charges, interest on overdraft, incidental charges, and amounts for unpaid (bounced or stopped) cheques returned by the bank.

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Question 9

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Explain the effect on the passbook balance when amounts are directly deposited in the bank account by debtors.

When a debtor directly deposits money into the firm's bank account, the bank immediately credits the firm's account and it is recorded in the passbook.
However, the firm does not receive any intimation about this deposit until it receives the bank statement, so no entry is made in the cash book.
As a result, the passbook balance is higher than the cash book balance, causing a difference between the two records.

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Question 10

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What is the effect on the passbook when the bank collects interest and dividends on behalf of the customer?

When the bank collects interest or dividend on behalf of the firm, it immediately credits the amount to the firm's account and records it in the passbook.
The firm, however, records these receipts in the cash book only after receiving the bank statement, which causes a delay.
Until the firm records these receipts, the passbook balance will be higher than the cash book balance, creating a difference between the two.

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Question 11

Quick Recall

What are standing instructions? How do they cause a difference between the cash book and passbook?

Standing instructions are orders given by a customer to the bank to regularly make certain payments on stated dates to third parties.
Examples include payment of telephone bills, insurance premiums, rent, and taxes that the bank makes directly on behalf of the customer.
Since the firm records these payments in the cash book only after receiving the bank statement, the passbook balance is less than the cash book balance until the entry is made.

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Question 12

Quick Recall

How does a dishonoured cheque cause a difference between the cash book and passbook balances?

When a cheque deposited by the firm is dishonoured, the bank debits the firm's account and records it in the passbook immediately.
However, the firm does not know about the dishonour until it receives the bank statement, so no entry is made in the cash book at that time.
As a result, the passbook balance becomes lower than the cash book balance, creating a difference between the two.

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Question 13

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What are the two main causes of difference between the cash book balance and the passbook balance?

The first main cause is timing differences, which arise because of a time gap in recording the same transaction in the cash book and the passbook.
The second main cause is errors, which can be committed either by the firm while recording entries in the cash book or by the bank while recording entries in the passbook.
Both types of differences need to be identified and listed in the bank reconciliation statement to reconcile the two balances.

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Chapter sections

Chapter bank-reconciliation-statement: Bank Reconciliation Statement | Short Questions

What is a Bank Reconciliation Statement?

Why is a Bank Reconciliation Statement prepared?

What is a bank passbook?

Explain the meaning of 'favourable balance as per cash book'.

What is a bank overdraft? How is it shown in the cash book and passbook?

How do cheques issued but not presented for payment cause a difference between cash book and passbook balances?

How do cheques deposited but not yet collected cause a difference between cash book and passbook?

What are direct debits made by the bank? Give two examples.

Explain the effect on the passbook balance when amounts are directly deposited in the bank account by debtors.

What is the effect on the passbook when the bank collects interest and dividends on behalf of the customer?

What are standing instructions? How do they cause a difference between the cash book and passbook?

How does a dishonoured cheque cause a difference between the cash book and passbook balances?

What are the two main causes of difference between the cash book balance and the passbook balance?

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