An enterprise take cash book balance as the base for preparation of bank reconciliation statement. Some of the bank charges have been put. These charges will be ___________.

added in cash book

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deducted in cash book

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nothing is to be done for this entry

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none of the above

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Solution

The correct option is B deducted in cash book
Bank charges are charged by the bank for providing its various services.
It is generally first recorded in the pass book (bank statement) and then taken into account in the cash book by the accountant. While preparing the bank reconciliation statement taking cash book as the base, such bank charges will be deducted in the cash book because it has not been recorded in the cash book yet. To reach to the balance as per pass book (bank statement) correctly, we will have to take into consideration all such causes of differences which have not been taken into account in the cash book.

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Q. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the pass book as these two show different balances for various reasons.

Prepare a bank reconciliation statement from the following information:
1. Overdraft balance as per cash book is Rs. 1,20,000.
2. Cheque deposited Rs. 30,000 but no entry was passed in cash book.
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Balance of bank account for preparation of bank reconciliation statement shall be taken from ___ for matching the same with cash book.

State whether the following Statements are True or False.

1) Bank Reconciliation Statement is prepared by Bank.
2) Bank Reconciliation Statement is prepared at the end of stipulated period.
3) Overdraft facility is allowed to proprietors personal account
4) Debit balance of Pass Book represents overdraft
5) Credit balance of Bank column of Cash Book represents the balance as per Cash book.
6) Bank charges debited by Bank increases bank balance in the Pass Book.
7) Interest credited in Pass Book is an income to the Customer.
8) Bank Reconciliation Statement is prepared to detect the errors the takes place in accounting

Q. While preparing bank reconciliation statement, balance of bank account shall be taken from for matching the same with cash book.

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