Class 11 Accountancy - Chapter Bank Reconciliation Statement NCERT Solutions | State the need for the preparation of ba
State the need for the preparation of bank reconciliation statement?
Among other reasons, enlisted below are some of the most important reasons why it is important to prepare a bank reconciliation statement:
Accuracy
Each month, the passbook of the bank and the cash book of a firm, display a particular amount, which is the balance in the bank as on that date. However, due to delay in the recording time and period of the same in the respective books, there is a high possibility that on the day of comparison the balances in the two books would not match.
Hence, having prepared a bank reconciliation statement, one can determine the reasons and amounts by which the two balances differ. This analysis would further help the accountant in recording the missing amounts in each book. Hence, after the preparation of a bank reconciliation statement, the books of accounts would actually display a true and fair position of the firm.
Check on the Entries
In the process of preparing a bank reconciliation statement, an accountant will be able to point out all entries or amounts, recorded incorrectly in either of the books.
Thus, it is quite useful to prepare a bank reconciliation statement, which would help in eliminating any entries recorded erroneously.
Rectifying Incorrect Entries
In case an amount or entry has been recorded incorrectly in both, the passbook and the cash book, the accountant will be able to rectify those entries, so as to arrive at the amount of correct bank balance in the passbook and the cash book.
Updated Cash Book
Again, due to the irregularity in posting the amount of entries in the cash book and due to the delays in the recording of such amounts, it is quite possible that the cash book would fail to show the updated bank balance of the bank as on a particular date. When compared with the passbook, an accountant would be able to identify such entries and record them in the cash book instantly. This would help in reconciling the balances of both the cash book and the bank book instantly.
Detection of Delays
Due to the preparation of the bank reconciliation statement, it is possible to discover any amount of cheques that get deposited in the bank but have aren’t credited.
This difference would be evident because the amount of such deposits would appear in the cash book but not in the bank book, hence giving rise to a difference in the bank balance of both. Thus, cheques deposited but not yet collected can come to notice quickly.
Check on the Dishonest Behavior of Employees
Preparation of regular bank reconciliation statements has several benefits. It would act as a moral check on employees so that they do not indulge in the embezzlement of bank cheques, which would ultimately cause loss to the firm. This is so because even a low-value cheque can come in detection if it has been accepted but not deposited. In this way, a bank reconciliation statement serves a large purpose for a firm’s accounting cycle and people.
More Questions From Class 11 Accountancy - Chapter Bank Reconciliation Statement
- Q:-
Fill in the blanks :
(i) Passbook is a copy of.............as it appears in the ledger of the bank.
(ii) When money is with drawn from the bank, the bank ............. the account of the customer.
(iii) Normally, the cash book shows a debit balance, passbook shows .............balance.
(iv) Favourable balance as per the cash book means .............balance in the bank column of the cash book.
(v) If the cash book balance is taken as starting point the items which make the cash book balance smaller than the passbook must be .............for the purpose of reconciliation.
(vi) If the passbook shows a favourable balance and if it is taken as the starting point for the purpose of bank reconciliation statement then cheques issued but not presented for payment should be .............to find out cash balance.
(vii) When the cheques are not presented for payment, favourable balance as per the cash book is .............than that of the passbook.
(viii) When a banker collects the bills and credits the account passbook overdraft shows .............balance.
(ix) If the overdraft as per the passbook is taken as the starting point, the cheques issued but not presented are to be .............in the bank reconciliation statement.
(x) When the passbook balance is taken as the starting point items which makes the passbook balance .............than the balance in the cash book must be deducted for the purpose of reconciliation. - Q:-
Favourable bank balance means:
(a) Credit balance in the cash book (b) Credit balance in passbook
(c) Debit balance in the cash book (d) Both (b) and (c) - Q:-
A bank reconciliation statement is mainly prepared for:
(a) Reconcile the cash balance of the cash book.
(b) Reconcile the difference between the bank balance shown by the cash book and bank passbook
(c) Both (a) and (b)
(d) None of these - Q:-
Passbook is a copy of:
(a) Copy of customer Account (b) Bank column of cash book
(c) Cash column of cash book (d) Copy of receipts and payments - Q:-
Unfavourable bank balance means:
(a) Credit balance in passbook (b) Credit balance in cash book
(c) Debit balance in cash book (d) None of these - Q:-
A bank reconciliation statement is prepared with the balance:
(a) Passbook (b) Cash book
(c) Both passbook and cash book (d) None of these - Q:-
Briefly explain the statement ‘wrongly debited by the bank’ with the help of an example.
- Q:-
State whether each of the following statements is True or False
1. Passbook is the statement of account of the customer maintained by the bank.
2. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons.
3. Cheques issued but not presented for payment will reduce the balance as per the passbook.
4. Cheques deposited but not collected will result in increasing the balance of the cash book when compared to passbook.
5. Overdraft as per the passbook is less than the overdraft as per cash book when there are cheques deposited but not collected by the banker.
6. The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank.
7. Favourable bank balance as per the cash book will be less than the bank passbook balance when there are unpresented cheques for payment.
8. Direct collections received by the bank on behalf of the customers would increase the balance as per the bank passbook when compared to the balance as per the cash book.
9. When payments made by the bank as per the standing instructions of the customer, the balance in the passbook will be more when compared to the cash book. - Q:-
Briefly explain the term ‘favourable balance as per cash book’.
- Q:-
Select the Correct Answer:
A bank reconciliation statement is prepared by:
(a) Creditors (b) Bank
(c) Account holder in a bank (d) Debtors
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Recently Viewed Questions of Class 11 Accountancy
- Q:-
The journal entry to record the sale of services on credit should include:
(a) Debit to debtors and credit to capital.
(b) Debit to cash and Credit to debtors.
(c) Debit to fees income and Credit to debtors.
(d) Debit to debtors and Credit to fees income. - Q:-
Fill in the Correct Words :
(a) Cash book is a ......... journal.
(b) In Journal proper, only......... discount is recorded.
(c) Return of goods purchased on credit to the suppliers will be entered in ...... Journal.
(d) Assets sold on credit are entered in .........
(e) Double column cash book records transaction relating to ......... and .........
(f) Total of the debit side of cash book is ......... than the credit side.
(g) Cash book does not record the ......... transactions.
(h) In double column cash book ......... transactions are also recorded.
(i) Credit balance shown by a bank column in cash book is .........
(j) The amount paid to the petty cashier at the beginning of a period is known as ......... amount.
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- Q:-
Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:-
Total of these transactions is posted in purchase account :
(i) Purchase of furniture
(ii) Cash and credit purchase
(iii) Purchases return
(iv) Purchase of stationery - Q:-
The periodic total of purchases return journal is posted to :
(i) Purchase account
(ii) Profit and loss account
(iii) Purchase returns account
(iv) Furniture account - Q:-
What entry (debit or credit) would you make to:
(a) increase revenue
(b) decrease in expense,
(c) record drawings
(d) record the fresh capital introduced by the owner. - Q:-
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- Q:-
Should a transaction be first recorded in a journal or ledger? Why?
- Q:-
Choose the Correct Answer :
The ledger folio column of journal is used to:
(a) Record the date on which amount posted to a ledger account.
(b) Record the number of ledger account to which information is posted.
(c) Record the number of amounts posted to the ledger account.
(d) Record the page number of the ledger account.
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