1. When preparing a BRS starting with the "Debit Balance as per Cash Book", how should "Cheques issued but not yet presented for payment" be treated?
Added.
Subtracted.
Multiplied by 2.
Ignored.
Explanation:
When you issue a cheque, you deduct it from the Cash Book immediately. However, the Passbook balance remains higher until the cheque is presented. To reconcile (match Passbook), you must add the amount back to the Cash Book balance.
2. If the starting point is "Overdraft as per Passbook", and a cheque of ?5000 deposited has not yet been collected/credited, what should be done?
Multiply by -1
No adjustment needed
Add ?5000
Subtract ?5000
Explanation:
Start: OD as per Passbook. Cheque deposited means Cash Book balance increased (OD decreased). Passbook hasn't changed yet (High OD). To match Cash Book (target), we must reduce the OD. But wait, logic check: Passbook OD is HIGH. Cashbook OD is LOW (because we assumed deposit). To go from Passbook to Cashbook, we must reduce the OD. "Less" in favorable balance logic means "Add" in Overdraft logic? Let's simplify. PB is -100. CB is -95 (cheque added). Start -100. Target -95. You must Add 5. Correct.
3. A "Debit Balance" in the Passbook indicates:
Bank error.
Nil balance.
Unfavorable Balance (Overdraft).
Favorable Balance (Money in bank).
Explanation:
For the bank, customer deposits are liabilities (Credit balance). Therefore, a Debit balance in the Passbook means the customer owes money to the bank (Overdraft).
4. Which of the following is a "Timing Difference" causing disagreement between Cash Book and Passbook?
Cheques issued but not presented for payment.
Cheque omitted to be recorded in Cash Book.
Double entry of a cheque.
Wrong total in Cash Book.
Explanation:
Errors (Wrong total, Omission, Double entry) are mistakes. "Cheques issued but not presented" is a timing difference because the transaction is correct but recorded at different times by the firm and the bank.
5. A customer directly deposited ?2000 in the bank account. In the BRS starting with Cash Book Balance, this amount will be:
Ignored
Subtracted
Divided
Added
Explanation:
Direct deposit increases the Passbook balance. The Cash Book balance is lower because the accountant doesn't know yet. To match the Cash Book with the Passbook (Target), we must ADD the amount.
6. A cheque deposited for ?10,000 was dishonoured. This was not recorded in the Cash Book. In BRS starting with Cash Book balance, this amount should be:
Added
Subtracted
Ignored
Multiplied
Explanation:
When deposited, Cash Book was increased. Dishonour means Passbook did not increase (or increased and decreased). Since Cash Book is still high, we must Subtract the amount to match Passbook.
7. In BRS, if the starting point is "Balance as per Cash Book" and the bank has wrongly credited the account with ?1000, what should be done?
Report to RBI
Add ?1000
Ignore as it is an error
Subtract ?1000
Explanation:
A wrong credit by the bank increases the Passbook balance. To reconcile the Cash Book with the Passbook (target), we must ADD the amount to the Cash Book balance, even though it is an error.
8. When using the "Amended Cash Book" method for reconciliation, which differences are adjusted in the Cash Book itself before preparing BRS?
All differences.
Timing differences (Cheques issued/deposited but not cleared).
Errors committed by the Bank.
Transactions already recorded by the Bank but not in Cash Book (e.g., Bank Charges, Direct Deposit) and Cash Book errors.
Explanation:
In this method, the Cash Book balance is first updated for items like Bank Charges, Interest, etc., which the bank has already passed. The BRS is then prepared only for timing differences (Cheques issued/deposited).
9. A Bill Receivable discounted with the bank was dishonoured. The bank debited the customer's account. This was not recorded in the Cash Book. To reconcile (starting from Cash Book):
Do nothing.
Add double the amount.
Subtract the amount.
Add the amount.
Explanation:
Bank has reduced the balance (Passbook down). Cash Book is higher. To match Passbook, Subtract from Cash Book.
10. A Debit Balance in the Cash Book is equivalent to:
Loan Account.
Debit Balance in Pass Book.
Credit Balance in Pass Book.
Overdraft in Pass Book.
Explanation:
Debit in Cash Book = Asset (Money we have). Credit in Pass Book = Liability for Bank (Bank owes us money). They are opposite.
11. Interest on Overdraft charged by the bank (not recorded in Cash Book) will cause the Passbook balance to be _____ than the Cash Book balance.
Explanation:
Interest charged increases the Overdraft (making the balance more negative/lower). Cash Book hasn't recorded it, so it shows a better position (higher/less negative).
12. Bank paid insurance premium as per Standing Instruction. This was not recorded in Cash Book. In BRS starting with Passbook balance, what to do?
Ignore.
None of the above.
Subtract the amount.
Add the amount.
Explanation:
Start: Passbook (Lower because payment made). Target: Cash Book (Higher because payment not recorded). To reach Target from Start, we must ADD.
13. Insurance premium paid directly by the bank as per standing instructions will result in:
Passbook balance being lower than Cash Book balance.
Passbook showing a credit.
Passbook balance being higher than Cash Book balance.
No difference.
Explanation:
Payment reduces the bank balance. Since it's not recorded in the Cash Book yet, the Cash Book balance remains higher.