Bank Reconciliation Statement

CPT Section A- Fundamentals of Accounting

Chapter 3
CA. Pankaj Goel
Meaning
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Bank Reconciliation Statement

Strictly speaking there should be no difference in

Cash Book(Bank Column) and Pass book(BANK
STATEMENT). .

However on a particular date it is possible that

balances on both the books do not tally.

After finding the reasons for non agreement of the

bank balances efforts are made to reconcile. This
statement is prepared in the form of BRS.
Importance of BRS

Errors which may have been committed

Undue delay in clearance of cheques

Discourages staff from embezzlement

 Reasons for Differences
• Timing differences –when time is different
1. Cheques issued but not presented-CASH
BOOK-Recorded When Cheque is Issued AND
IN PASS BOOK when cheque is presented for
payment
2. Cheques paid/deposited into bank but not
presented/cleared/banked: -CASH BOOK-
Recorded When Cheque is deposited/recived
AND IN PASS BOOK when cheque is
collected/credited
Reasons for Differences-
Contd:
3. Interest and dividend collected by bank -
CASH BOOK-Recorded When information
from bank is received AND IN PASS BOOK
when interest is credited by bank
4. Bills collected by bank on behalf of the
customer /direct payment by bank- CASH
BOOK-Recorded When information from bank
is received AND IN PASS BOOK when
amount is credited/added by bank
Reasons for Differences

like writing
• Due to errors in recording the entries
cash transaction in bank ,undercasting etc
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Cash Book
 D C
R R

10
PASSBOOK STATEMENT is ISSUED BY BANK and it is copy of
customer accounts in bank ledger/BOOKS
Pankaj Sir’s Principle

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 7/12/2013
REMEMBER TWO PRINCIPLES OF PANKAJ
SIR
1. IF CASH BOOK is GIVEN –THEN TAKE
PASS BOOK -opposite AS GOD and Cash
Book as INSAAN

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2. IF PASS BOOK IS GIVEN –THEN TAKE
CASH BOOK opposite ISGOD and Pass
Book as INSAAN

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 7/12/2013
Remember
• GOD never does wrong so do exactly same as done
i.e if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if
done +, the u do -

13
Pankaj Sir’s Principle-Revise
If balance as per CB-INSAAN is starting point

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REVERSE THE ENTRY DONE BY PASS SAME ENTRIES DONE BY
INSAAN GOD/PASS BOOK

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Uncollected cheques, cheque Bank charges, direct payment by
deposited not cleared, cheque bank, dishonour of bill-SUBTRACT
recorded but omitted to be

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banked, over cast of bank column
of cash book-SUBTRACT

Cheque issued not presented for Bank interest, direct deposit by

payment, under cast of bank customer-ADD
column of cash book-ADD 14
IN CASE OF OVER DRAFT-TAKE GIVEN PART AS GOD AND OTHER AS
INSAAN
 Story
Lets Understand

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 12-07-2013
PICTURE
START
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Story of Two Person-Customer and 25

Bank
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STORY- OF POSITIVE

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BALANCE

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Debit Balance In Cash Book/Credit Balance In
Pass Book
26
Need to Open an Account

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Bipasha

Hi Johny

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I WANT TO
open a Saving
John
Account?

27
Need to Open an Account

7/12/2013
John

28
PassBook

7/12/2013
Bipasha

I want to
deposit
Rs.20,000/- John

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Pass Book Issued By Bank To Customer

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 Detailed Statement
D C
R R

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• PASSBOOK STATEMENT is ISSUED BY BANK and it is copy of 31
customer accounts in bank ledger
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Bipasha

ok I got the
idea what is
Pass Book John

32
 7/12/2013
Bipasha

CREDIT
MEANS
John

33
 7/12/2013
Bipasha

IN MY
BOOKS , IT
WILL BE? John

34
Lets Summarise

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Lets Summarise
1. PASSBOOK – CREDIT MEANS BANK WILL GIVE/BANK BALANCE –GOOD

SIGN

2. PASSBOOK – DEBIT MEANS BANK WILL TAKE –BAD SIGN- OVERDRAFT

3. CASH BOOK – CREDIT MEANS BANK WILL TAKE –BAD SIGN

4. CASH BOOK – DEBIT MEANS BANK WILL GIVE –GOOD SIGN

5. IN B/S, BALANCE AS PER AMENDED CASH BOOK IS SHOWN AND NOT AS

PER PASSBOOK

6. BRS IS PREPARED PERIODICALLY

36
 Cash Book (bank column only)

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Debit represents an increase Credit represents an decrease

Bank Statement/Pass Book

Dr Cr Balance

(represents (represents (represents

decrease) increase) the amount
owned to 37
the clients)
 IT IS JUST
STATEMENT FOR
MATCHING IT IS PREPARED WITH
BALANCE – NOT BANK STATEMENT
PART OF AND BANK COLUMN
ACCOUNTING OF CASH BOOK
PROCESS

CASHBOOK PASSBOOK

38
Thus, What is BRS-

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Bank Reconciliation Statement (BRS)

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This statement is prepared by CUSTOMER

at the end of specific intervals, may be daily or monthly or

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quarterly or annually , depending on the size and frequency of
transactions of business.

The basic purpose of such statement is to reconcile the

difference between cash book and pass book balances 39
After One Month

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 7/12/2013
Bipasha

Johny I
AM
WORRIED John

41
 7/12/2013
Bipasha
I GOT PASSBOOK
UPDATED IT SHOWED
RS 24000? BUT I
HAVE NOT
DEPOSITED ANY John
CASH

42
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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REMEMBER-PANKAJ SIR’S

7/12/2013
TRICK
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

44
Bank Reconciliation Statment
BANK RECONCILIATION STATMENT

BALANCE as per Cash Book 20000

•Interest Credited in Pass Book but not yet in Cash
Book- (GOD-DIRECT) ADD 5000
•Bank payment to lic (GOD-DIRECT)-MINUS ( 3500)
•Direct payment by Chintu-ADD(GOD-DIRECT) 2500

BALANCE AS PER PASS BOOK 24000

45
 Who Prepares BRS

CUSTOMER/
BUSINESS
/MANAGMENT

BIPASHA

46
Practice 1

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Illustration 1
From the following particulars ascertain the balance

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that would appear in the Bank Pass Book of A on 31st
December, 2012.
(1) the bank BALANCE as per Cash Book on 31st
December, 2012 Rs. 6,300.

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(2) Interest on overdraft for 6 months ending 31st
December, 2012 Rs. 160 is entered in Pass Book.
(3) Bank charges of Rs. 30 for the above paid are

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debited in the Pass Book.
(4) Cheques DEPOSITED BY CUSTOMER, amounted
to Rs. 1,200.

48
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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REMEMBER-PANKAJ SIR’S

7/12/2013
TRICK
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

50
 7/12/2013
BANK RECONCILIATION STATMENT

BALANCE as per Cash Book 6300

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•Interest debited in Pass Book but not yet in Cash
Book- (GOD-DIRECT) MINUS (160)
•Bank Charges (GOD-DIRECT)-MINUS ( 30)
•Direct payment by Customer
(GOD-DIRECT)-ADD 1200

BALANCE AS PER PASS BOOK 7310

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Next story

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 7/12/2013
Bipasha
JOHNY I HAVE
ACCOUNT
IN UR BANK?

John

53
 7/12/2013
Bipasha

WHATS MY
BALANCE?

John

54
 7/12/2013
Bipasha

BUT MY
BOOKS
SHOWED John
RS 25000?

55
 7/12/2013
Bipasha
YES TO
ABHISHEK RS
10000?
And I subtracted
John

56
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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 7/12/2013
Remember-Pankaj sir’s trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

58
Bank Reconciliation Statment

BANK RECONCILIATION STATMENT

BALANCE as per Cash Book 25000

Cheques issued but not presented for
payment(INSAN-REVERSED) ADD 10000
BALANCE AS PER PASS BOOK 35000

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Next story

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 7/12/2013
Bipasha

JOHNY I
HAVE
ACCOUNT John
IN UR
BANK?

61
 7/12/2013
Bipasha
WHATS MY
BALANCE?

John

62
After One Month

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 7/12/2013
Bipasha
Johny I AM
WORRIED?

John

64
 7/12/2013
Bipasha
BUT MY BOOKS
SHOWED
RS 35000?

John

65
 7/12/2013
Bipasha
YES from
ABHISHEK
RS 10000
and I added to
my books John

66
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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 7/12/2013
Remember-Pankaj Sir’s Trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

68
Bank Reconciliation Statment

BANK RECONCILIATION STATMENT

BALANCE as per Cash Book 35000

Cheque deposited but not collected (INSAAN-
REVERSED) MINUS (10000)
BALANCE AS PER PASS BOOK 25000

69
Practice 2

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Illustration
From the following particulars ascertain the balance that would appear in
the Bank Pass Book of A on 31st December, 2006.

(1) the bank DEBIT BALANCE as per Cash Book on 31st December, 2006
Rs. 6,340.

(2) Interest on overdraft for 6 months ending 31st December, 2006 Rs. 160 is
entered in Pass Book.

(3) Bank charges of Rs. 30 for the above paid are debited in the Pass Book.

(4) Cheques issued but not cashed prior to 31st December, 2006, amounted
to Rs. 1,168.

(5) Cheques paid into bank but not cleared before 31st December, 2006
were for Rs. 2,170.

(6) Interest on investments collected by the bank and credited in the Pass
Book Rs. 1,200.
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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 7/12/2013
Remember-Pankaj Sir’s Trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

73
BANK RECONCILIATION STATMENT
BALANCE as per Cash Book 6300
•Interest debited in Pass Book but not yet in Cash
Book- (GOD-DIRECT) (160)
•Interest credited in Pass Book but not yet in Cash
Book- (GOD-DIRECT) 1200
•Bank Charges (GOD-DIRECT) ( 30)
Cheque Issued but not presented(INSAAN-
REVERSED) 1168
Cheques paid into bank but not cleared(INSAAN-
REVERSED) (2170)

BALANCE AS PER PASS BOOK 6348

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Practice 3

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 Illustration 3
1.On 30th December, 2006 the bank column of A. Philip’s cash book
showed a debit balance of Rs. 461. On examination of the cash book
and bank statement you find that :

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2.Cheques amounting to Rs. 630 which were issued to creditors and
entered in the cash book before 30th December, 2006 were not
presented for payment until that date.

3.Cheques amounting to Rs. 250 had been recorded in the cash

book as having been paid into the bank on 30th December, 2006, but
were entered in the bank statement on 1st January, 2007.

4 A dividend of Rs. 38, paid direct to the bank had not been
recorded in the cash book..

5.. Bank interest and charges amounting to Rs. 42 had been 76

charged in the bank statement but not entered in the cash book
KYA BHAGWAN/GOD
NE ENTRY KARI

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KYA INSAAN NE
ENTRY KARI

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 7/12/2013
Remember-Pankaj Sir’s Trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

78
 Bank Reconciliation Statment
BANK RECONCILIATION STATMENT
BALANCE as per Cash Book 461
•Interest credited in Pass Book but not yet in Cash
Book- (GOD-DIRECT) 38
•Cheque Issued but not presented(INSAAN-
REVERSED) 630
Cheques paid into bank but not cleared(INSAAN-
REVERSED) (250)
Charges debited in Pass Book but not yet in Cash Book-
(GOD-DIRECT) (42)
BALANCE AS PER PASS BOOK 837 79
 Drawing Up A Bank
Reconciliation Statement
• To reconcile the bank statement with the corrected
cash book

Check the Update the Prepare the

bank cash book bank
statement with any reconciliation
and the cash omissions statement.
book to see and errors
the items made by
which have the itself.
been omitted.
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Debit Balance In Pass Book/Credit Balance In
Cash Book

Next Story-overdraft 81
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REMEMBER TWO PRINCIPLES OF PANKAJ
SIR-OVERDRAFT
1. IF CASH BOOKGIVEN –THEN TAKE
CASH BOOK AS GOD

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2. IF PASS BOOK IS GIVEN –THEN TAKE
PASS BOOK AS GOD

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 7/12/2013
Bipasha
JOHNY I HAVE
current
ACCOUNT
IN UR BANK?
John

83
 7/12/2013
Bipasha
WHATS MY
BALANCE?

John

84
After One Month

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 7/12/2013
Bipasha
johnyI AM
WORRIED?

John

86
 7/12/2013
Bipasha
I have issued cheque
to
ABHISHEK for
RS 100000
and subtracted in John
my books?
My book shows rs(
65000)

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 7/12/2013
Bipasha
WHY 70000?

John

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 7/12/2013
Bipasha
WHY 70000?

John

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 7/12/2013
Bipasha
overdraft
MEANS?

John

90
 7/12/2013
Bipasha
IN MY BOOKS ,
IT WILL BE?

John

91
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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 7/12/2013
Remember-Pankaj Sir’s Trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

93
 Bank Reconciliation Statment
BANK RECONCILIATION STATMENT

BALANCE as per Cash Book(OD) 65000

BANK CHARGES-REVERSE-ADD(INSAAN) 5000
OD as per Pass Book 70000

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Next Story-Errors

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 7/12/2013
Bipasha
JOHNY I HAVE
ACCOUNT
IN UR BANK?

John

96
 7/12/2013
Bipasha
WHATS MY
BALANCE?

John

97
 7/12/2013
Bipasha

My cash book
shows rs 20 000

John

98
 7/12/2013
Bipasha
let me check

John

99
 7/12/2013
Bipasha
Yes u were right
I put
less amount on
debit side?-
-undercast by John
5000

10
0
KYA BHAGWAN/GOD
NE ENTRY KARI

7/12/2013
KYA INSAAN NE
ENTRY KARI

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10
1
 7/12/2013
Remember-Pankaj Sir’s Trick
• GOD never does wrong so do exactly same as done i.e
if + then add, if – then subtract etc
• INSAAN-always make mistake, so do reverse, if done
+, the u do -

102
 Bank Reconciliation Statement
BANK RECONCILIATION STATMENT
BALANCE as per Cash Book 25000
•Undercast in Cash Book(INSAAN-REVERSED) 5000

BALANCE AS PER PASS BOOK 30000

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3
Practice 4
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Illustration

From the following information, prepare a Bank reconciliation

statement as at 31st December, 2006 for Messers New Steel
Limited: Rs.
(1) Bank overdraft as per Cash Book
on 31st December, 2006. 2,45,900
(2) Interest debited by Bank on 26th December, 2006
but no advice received 27,870
(3) Cheque issued before 31st December, 2006 but
not yet presented to Bank 66,000
(4) Transport subsidy received from the State
Government directly by the Bank but not
advised to the company 42,000
Continued:
(5) Draft deposited in the Bank, but
not credited till 31st December, 2006 13,500
(6) Bills for collection credited by the
Bank till 31st December, 2006 but no
advice received by the company 83,600
(7) Amount wrongly debited to
company account by the Bank,
for which no details are available 7,400
Answer 4
Solution

M/s. New Steel Ltd.

Bank Reconciliation Statement as on 31st Dec. 2006

Particulars Rs. Rs.

Overdraft as per Cash Book 2,45,900

Add: Interest charged by the bank 27,870
Draft deposited in bank but not yet credited 13,500
Wrong debit by the bank, under verification 7,400 48,770
2,94,670
Less: Cheque issued but not yet presented 66,000
Transport subsidy not yet recorded in the Cash Book 42,000
Bills for collection credited in the bank not yet
entered in 83,600 1,92,100
the Cash book 1,02,570 10
7
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Amended cash book-
balance shown in b/s
• Items which appears only in pass book like interest,
charge etc are shown in Amended cash book and
rectification entries in cash book like CASH BALANCE
RECORDED IN BANKetc

109
MCQ 1:When the balance as per Cash Book is the
starting point, direct deposits by customers are :

a)added

b)subtracted;

c)not required to be adjusted

d)neither of the two

Answer: a
MCQ 2:A Bank Reconciliation Statement is a

a)part of Cash Book;

b)part of Bank Account;
c)part of financial statements,
d)none of the above.
Answer:d
MCQ 3: When balance as per Pass Book is the
starting point, interest allowed by Bank is

a)added

b)subtracted

c)not required to be adjusted

d)None of the above.

Answer:b
MCQ 4:A Bank Reconciliation statement is
prepared with the help of:

a) Bank statement and bank column of the Cash Book.

b) Bank statement and cash column of the Cash Book.

c) Bank column of the Cash Book and cash column of the Cash
Book

d) None of the above.

Answer:a
MCQ 5

5.Debit balance as per Cash Book of ABC

Enterprises as on 31.3.2006 is Rs. 1,500.
Cheques deposited but not cleared amounts
to Rs. 100 and Cheques issued but not
presented of Rs. 150. The bank allowed
interest amounting Rs. 50 and collected
dividend Rs. 50 on behalf of ABC Enterprises.
Balance as per pass book should be
• a) 1,600.
• b) 1,450.
Answer: d
• c) 1,850. 1500-100+150+50+50=1650
• d) 1,650.
MCQ 6

6.The cash book showed an overdraft of

Rs. 1,500 as cash at bank, but the pass
book made up to the same date showed
that cheques of Rs. 100, Rs. 50 and Rs.
125 respectively had not been presented
for payments; and the cheque of Rs. 400
paid into account had not been cleared.
The balance as per the cash book will be
• a) Rs. 1,100.
• b) Rs. 2,175. Answer: c
• c) Rs. 1,625. 1500-100-50-125+400=1625
• d) Rs. 1,375.
MCQ. 7.When drawing up a Bank Reconciliation
Statement, if you start with a debit balance as per the
Bank Statement, the unpresented cheques should be:

a)Added;

b)Deducted;

c)Not required to be adjusted.

d)None of the above.

Answer:a
MCQ 8:A debit balance in the depositor’s Cash
Book will be shown as:

a) a debit balance on the Bank Statement.

b) a credit balance on the Bank Statement.

c) an overdrawn balance on Bank Statement.

d) None of the above.

Answer:b
MCQ 9

9.When preparing a Bank Reconciliation

Statement, if you start with a debit balance as
per the Cash Book, cheques issued but not
presented within the period should be:
• a) Added;
• b)Deducted;
• c)not required to be adjusted Answer :a
• d)None of the above.
MCQ 10. When the balance as per Pass Book
is the starting point, direct payment by bank
are:

a) added in the bank reconciliation statement

b) subtracted in the bank reconciliation statement

c) Not required to be adjusted in the bank reconciliation statement.

d) Neither of the above.

Answer:a
MCQ 11. When balance as per Cash Book is
the starting point, uncollected cheques are:

a) added in the bank reconciliation statement

b) subtracted in the bank reconciliation

statement
c) ‘Not required to be adjusted in the bank
reconciliation statement

d) nether of the above.

Answer:b
MCQ 12; A Bank Reconciliation Statement is prepared
to know the causes for the difference between:

a) the balances as per cash column of Cash Book and

the Pass Book.

b) the balance as per bank column of Cash Book and

the Pass Book.

c) the balance as per bank column of Cash Book and

balances as per cash column of Cash Book

d) Neither of the above.

Answer:b
MCQ 13. When the balance as per Pass Book
is the starting point, uncollected cheques are:

a) added in the bank reconciliation statement

b) subtracted in the bank reconciliation statement

c) not required to be adjusted in the bank reconciliation

statement.

d) neither of the above.

Answer: a
MCQ 14: When balance as per Cash Book is
the starting point, interest charged by Bank is:

a) Added in the bank reconciliation statement

b) subtracted in the bank reconciliation

statement.
c) not required to be adjusted in the bank
reconciliation statement

d) neither of the above.

Answer:b
MCQ 15: Match the following items
from column A with column B
S.No Column A Column B
1. Debit Balance in the (a) Account holders
Cash Book means
2. A Bank Reconciliation (b) Overdraft as per
is prepared by: Pass Book
3. A Bank Statement is a (c) Credit balance as
copy of: per Pass Book
4. (d) A customers
Credit Balance in the account in the
cash book means Bank’s book 12
4
Answer 15

S.No Column A Column B

1. Debit Balance in the (c) Credit balance as
Cash Book means per Pass Book
2. A Bank Reconciliation (a) Account holders
is prepared by:
3. A Bank Statement is a (d) A customers
copy of: account in the
4. Bank’s book
Credit Balance in the (b) Overdraft as per
cash book means Pass Book
125
MCQ 16:Direct payment to the third
party on behalf of the account holder is
entered in
a)the cash-book when the amount is paid by the bank

b)the cash-book when the entry is posted in the pass-

book

c)the pass-book when the amount is paid by the bank

d) the pass-book when the entry is posted in the pass-

book

Answer:c
MCQ 17:Payment done by the account
holder through issuing a cheque is
entered in
a)the pass-book at the time of issuing the cheque

b)the cash-book at the time of presenting the cheque to

the bank for payment

c)the pass-book at the time of presenting the cheque to

the bank for payment

d) the cash-book at the time of issuing the cheque

Answer;d
Bank Reconciliation Statement
THE END