Bank Reconciliation Statement is a record book of the transactions of a bank account. This statement helps the account holders to check and keep track of their funds and update the transaction record that they have made. Show
The balance mentioned in the bank passbook of the statement must tally with the balance mentioned in the cash book. In the statement, all the deposit will be shown in the credit column and withdrawals will be shown in the debit column. However, if the withdrawal exceeds deposit it will show a debit balance (overdraft). Given below are important MCQs on Bank Reconciliation Statement to analyze your understanding of the topic. The answers are also given for your reference. 1. In cash book, the favourable balance indicates A) Credit Balance B) Debit Balance C) Bank Overdraft D) Adjusted Balance Answer: B 2. On the bank statement, cash deposited by the company is known as A) Credit B) Debit C) Liability D) Expenses Answer: A 3. Bank reconciliation statement compares a bank statement with _________ A) Cash payment journal B) Cash receipt journal C) Financial statements D) Cashbook Answer: D 4. What is “Deposit in transit” in bank reconciliation? A) Added to Bank Balance B) Subtracted From Bank Balance C) Subtracted From the Cash Book Balance D) Added to Cashbook Balance Answer: A 5. ‘NSF’ marked in cheque sent back by the bank indicates A) Cheque has been forged B) A bank couldn’t verify the identity C) Not sufficient funds D) A cheque cannot be cashed because it’s illegal Answer: C 6. Bank reconciliation description is composed of A) Bank Accountant B) Business Manager C) Business Accountant D) Controller of the bank Answer: C 7. An unadjusted balance in cash book is because of the result of which error? A) Deposit in transit B) The omission of Bank charges C) Outstanding cheques D) Unpresented cheques Answer: B 8. Unpresented cheques also referred to as A) Bounced cheques B) Outstanding cheques C) Uncredited cheques D) Uncollected cheques Answer: B 9. In cash book, bank charges of ₹5,000 was not recorded. Name the correct cash book adjustment A) It will be credited in cash book B) It will be debited in cash book C) No adjustment needed in the cash book D) Charges will be added to the cash book balance Answer: A 10. What type of cheques is that which is issued by a firm but not yet presented to the bank A) Uncredited cheques B) Outstanding cheques C) Uncollected cheques D) Bounced cheques Answer: B Stay tuned to BYJU’S for more MCQs on Economics, question papers, sample papers, syllabus and Commerce notifications. In some cases, discrepancies in the cash book and bank statement may arise from errors committed by the bank or by the person responsible for writing up the cash book. These errors have to be properly rectified. This article shows several examples of such errors and omissions. 1. Errors Resulting in More Bank Balance in the Cash BookA few examples of errors and omissions are given below that lead to a greater bank
balance in the cash book. Due to this omission, the cash book shows a greater bank balance while the bank statement shows less bank balance. This leads to more bank balance in the bank statement. If the debit side of the cash book (bank column) is overcast, or if the credit side is undercast, then the cash book will show more bank balance compared to the bank statement. Suppose that on receiving a check from debtors, we deposit it at the bank after recording it in the cash book. The bank forgets to record it in the bank statement, or it is wrongly recorded in the debit column of the bank statement. Due to this error, the cash book will show more bank balance and the bank statement will show less bank balance. Treatment of Errors and Omissions Resulting in More Bank Balance in Cash Book When Preparing the Bank Reconciliation StatementWhenever the bank balance in the cash book is higher than the bank statement balance due to an error or omission, the number of errors and omissions will be credited. This will bring down the balance at the level of the bank statement while preparing the bank reconciliation statement. 2. Errors Resulting in Less Bank Balance in Cash BookExamples are given below of errors and omissions that result in less bank balance in the cash book. Sometimes after receiving a check from debtors, it is deposited at the bank but not recorded in the cash book (on the debit side of the bank column). Due to this error, the cash book shows a lower bank balance compared to the bank statement. (c) Issued Check Not Recorded by the Bank In some cases, we may issue a check to our creditor and the bank pays the amount of the check but forgets to record it in the bank statement (in the withdrawals column). For such mistakes, the cash book shows less bank balance compared to the bank
statement. Treatment of Errors and Omissions Resulting in Less Bank Balance in Cash Book When Preparing the Bank Reconciliation StatementWhenever by any error or omission the cash book shows less bank balance compared to the bank statement balance, the number of errors and omissions will be debited to bring up the balance at the level of the bank statement, while preparing a bank reconciliation statement. Summary of the DiscussionOn a specific date when a bank reconciliation statement is prepared, the amount of the item is debited in the statement if (for any reason) the cash book shows less bank balance compared to the balance of the bank statement. On the other hand, if for any reason the cash book shows more bank balance compared to the balance of the bank statement, then the amount of that item is credited in the bank reconciliation statement. Frequently Asked QuestionsHow to treat the bank errors in the bank reconciliation statements?If the bank reconciliation statement begins with the debit balance as per the bank column of the cash book, add all amounts credited by the bank and credit the corresponding amounts in the bank column of the cash book that are erroneously credited by it. What is undercast and overcast in the bank reconciliation statement?Understated and overstated are accounting terms that refer to inaccurate figures. Understated figures are also called undercast, while overstated figures are also called overcast. How to find errors in a bank reconciliation statement?There are different ways of checking the errors. The first three steps to finding errors in a bank reconcilation statement involves checking if the beginning balance is equal or not to the prior ending balance, comparing the ending balance with account balance, and verifying outstanding check and deposit totals. What is a cash book undercast?When a total is undercasted, it means that the total is lower than the correct figure. For example- the total of payments side of the cash book was $12,000 but it was found that it was undercasted by $200. How are the bank errors recorded on the bank reconciliation?When recording errors appear on a bank statement, the bank balance must be adjusted to reflect the correct amount. If an item cleared the bank for less than the amount shown in the books, the error is added to the book balance. If an item cleared for more than what was shown in the books, then it is subtracted from the book balance.  About the Author True Tamplin, BSc, CEPF®True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.
What would result in a cash book balance being lower than the balance showing on a bank statement?Also interest on loans or overdraft will be debited by the bank directly which is not recorded in the cash book.As a result, the balance as per the bank passbook would be less than the one shown in the cash book.
What would cause the bank statement balance to be less than the adjusted cash balance in the general ledger?Reasons a Bank Balance Will Differ from a Company's Balance
Deposits in transit. Bank service charges and check printing charges. Errors on the company's books. Electronic charges and deposits that appear on the bank statement but are not yet recorded in the company's records.
Which of the reason are for bank passbook showing less balance than cash book?Favourable bank balance as per the cash book will be less than the bank pass book balance when there are unpresented cheques for payment.
Why is my book balance different from my account balance?Book balance can include transactions that have yet to settle or clear through the bank account. Book balance reflects the funds that a company owns after adjustments have been made for checks that have yet to clear, deposits in transit, or other pending deductions from an account.
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What would result in a cash book balance being lower than the balance showing on the bank statement?
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