NIOS Class 10 Accountancy Chapter 8 Bank Reconciliation Statement

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NIOS Class 10 Accountancy Chapter 8 Bank Reconciliation Statement

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Bank Reconciliation Statement

Chapter: 8

Intext Questions 8.1

I. In each of the following cases indicate the alternative which you consider to be correct.

(i) A bank reconciliation statement is prepared to know the causes for the difference between:

(a) The balance as per cash column of the cash book and pass book.

(b) The balance as per bank column of the cash book and pass book.

Ans: (b) The balance as per bank column of the cash book and pass book.

(ii) Bank reconciliation statement is:

(a) a Ledger account.

(b) a part of the cash book.

(c) a statement separately prepared to find out the causes of difference between the bank column of cash book and pass book.

Ans: (c) a statement separately prepared to find out the causes of difference between the bank column of cash book and pass book.

(iii) A bank reconciliation statement is prepared with the help of:

(a) Bank pass book and bank column of cash book.

(b) Bank pass book and cash column of cash book.

Ans: (a) Bank pass book and bank column of cash book.

II. Fill in the blanks with suitable words/words.

(i) The copy of a customer’s account with the bank is called__________.

Ans: Pass book.

(ii) The cheques deposited are entered on the __________ of the bank column of the cash book.

Ans: Debit side.

(iii) Bank reconciliation statement is prepared to _______the bank balance as shown by the cash book and the bank statement.

Ans: Reconcile.

III. Given below are statements. Some of these statements are true and some are false. Write ‘T’ for True and ‘F’ for false statements.

(i) Bank credits the trader’s account as soon as it receives cheques from the firm.

Ans: False.

(ii) Bank makes certain payments on behalf of the customer under his standing instructions.

Ans: True.

(iii) Bank charges are never entered in the cash book.

Ans: False.

(iv) Direct receipts by the bank on behalf of the customer would increase the balance shown by the pass-book.

Ans: True.

Intext Questions 8. 2

I. You are given the balance as per Pass Book and balance as per Cash Book is to be ascertained by you. Out of the following transactions, write ‘A’ against those amounts which will be added to the balance of the Pass Book and ‘R’ against those by which the balance of the Pass Book will be reduced.

(i) Bank charges.

Ans: A.

(ii) Cheques issued but not encashed.

Ans: R.

(iii) Cheques deposited with the bank and dishonoured

Ans: A.

II.

Multiple Choice Questions

(i) Which of the following is a correct statement related to ‘bank reconciliation statement’.

(a) It is prepared after every month.

(b) It is prepared after every six months.

(d) It is prepared periodically.

Ans: (d) It is prepared periodically.

(ii) The balance as per Cash Book is 8000. Cheques of Rs. 5000 and cheque of Rs. 18000 were issued, but were not presented for payment. What will be the balance as per pass book after reconciliation?

(a) Rs. 8000

(b) Rs. 13000

(d) Rs. 31000

Ans: (d) Rs. 31000

(iii) While preparing a bank reconciliation statement from the pass book balance, which of the following items will be subtracted?

(a) Cheques deposited but not credited.

(b) Cheque issued but not presented for payment.

(d) Insurance Premium paid by the bank.

Ans: (b) Cheque issued but not presented for payment.

(iv) Which of the following statements related to bank reconciliation statements is correct?

(a) It is prepared to ascertain profit of the business concern.

(b) It is prepared to calculate the balance as per cash book at the end of the month.

(d) It is prepared to ascertain the financial position of the business.

Ans: (c) It is prepared to reconcile the balance as per cash book and as per pass book.

(v) The pass book shows a debit balance of Rs. 4,500 and a customer has directly deposited Rs. 2,000 in the bank account which is not recorded in the cash book. What will be the balance as per cash book?

(a) Rs.6,500

(b) Rs.2,500 (for favourable)

(d) Rs.2,500 (overdraft)

Ans: (c) Rs.6,500 (overdraft).

Terminal Exercise

1. What is meant by a Bank Reconciliation Statement?

Ans: Bank Reconciliation Statement is a statement prepared periodically with a view to enlist the reasons for difference between the balances as per the bank column of the cashbook and passbook/bank statement on any given date.

2. What is the need of preparing a Bank Reconciliation Statement?

Ans: A Bank Reconciliation Statement is a statement reconciling the balance as shown by the bank passbook and the balance as shown by the Bank column of the Cashbook.

(i) Detecting Errors: It helps in identifying errors and discrepancies between the bank statement and the company’s records. These errors may include bank charges, interest earned, or deposits or withdrawals not yet recorded by the company.

(ii) Ensuring Accuracy: It ensures the accuracy of the company’s financial records by reconciling the balances shown in the bank statement with the balances shown in the company’s books. Discrepancies may arise due to timing differences or errors in recording transactions.

(iii) Preventing fraud: A conducive bank reconciliation system enhances the operational efficiency of financial reporting and helps prevent and detect frauds and errors in the disbursement system. This is largely important. Corporate funds can be easily embezzled, identifying the flaws in the payment disbursement system.

(iv) Managing cash flow: Bank reconciliation is a simple and invaluable process to help manage cash flows. When done frequently, reconciliation statements help companies identify cash flow errors, present accurate information to investors, and plan and pay taxes correctly.

(v) Compliance and Reporting: Bank reconciliation is often required for regulatory compliance and financial reporting purposes. Accurate financial reporting relies on reconciling bank accounts to ensure that all transactions are properly recorded and accounted for.

3. Enumerate the causes of difference in the balances of cash book and pass book.

Ans: The reasons for difference in balance of the cash book and pass book are as under:

(i) Cheques issued by the Trader but not yet presented for payment: When cheques are issued by Trader in favour of his creditors, these are shown on the payment side of the bank column of the cash book. It reduces the bank balance as per cash book. The bank will debit the firm’s account when these cheques are presented for payment.

(ii) Cheques deposited into the bank but not yet collected or credited by the Bank: When cheques are deposited into the bank, the firm immediately enters it on the debit side of the bank column of the cash book. It increases the bank balance as per the cash book. However, it takes time in, collect the amount of cheques, so Bank Balance does not increase on the same date on which the cheque has been deposited in the bank.

(iii) Amount directly deposited by customers/debtors in the bank account: When the debtors of the businessman have been given the authority to deposit the amount due from them in the firm’s account with the bank, the bank credits the firm’s account with the amount deposited but the same amount is not recorded in the cash book on the day it is deposited.

(iv) Bank charges charged by the Bank: The bank charges, fees or commission from time to time for various services provided to the customer and debits the customers’ account without intimation to the firm/customer. As a result, the balance of the cash book will be more than the balance of the pass book.

(v) Interest and dividend received by the bank on behalf of the customer: The interest on debentures or dividend on shares held by the account holder is directly deposited by the company in the bank account of the customer through Electronic Clearing System (ECS). But there may not be any entry in the cash book for such items because the firm does not get the information till it receives the bank statement.

(vi) Direct payments made by the bank on behalf of the customer: The firm may give standing instructions to its banker to make payment of telephone bills, rent, insurance premium, taxes, etc.

(vii) Dishonour of cheques deposited with bank: A firm may receive a number of cheques from its customers. Some of the cheques deposited by the firm with the bank may be dishonoured. In this case, the Bank debits the firm’s account.

(viii) Errors committed in recording transactions by the firm: The firm may commit certain errors e.g., omission or wrong recording of transactions relating to cheques deposited, cheques issued and wrong balancing etc. In this case, there would be a difference between the balances as per Cash Book and as per Pass Book.

(ix) Errors committed in recording transactions by the Bank: The bank may also commit errors while recording transactions in the customer’s account, e.g., omission or wrong recording of transactions relating to cheques deposited etc. As a result, the balance of the bank pass book and cash book will not agree.

4. From the following particulars, prepare Bank Reconciliation Statement as on December 31, 2012.

(i) Balance as per Cash Book Rs. 4,200

(ii) Cheques issued but not presented for payment Rs. 2,000

(iii) Cheques deposited but not collected Rs. 3,000

(iv) Bank Charges debited by the Bank Rs. 250

Ans:

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