II. Very Short Answer Questions

Question 1.
What is meant by bank overdraft?
Answer:
It is not possible to have unfavourable cash balance in the cash book. But, it is possible to have unfavourable balance in the bank account. When the business
is not having sufficient money in its bank account, it can borrow money from the bank. As a result of this, amount is overdrawn from bank.

Question 2.
What is bank reconciliation statement?
Answer:
If every entry in the cash book matches with the bank statement, then bank balance will be the same in both the records. But, practically it may not be possible. When the balances do not agree with each other, the need for preparing a statement to explain the causes arises. This statement is called bank reconciliation statement (BRS).

Question 3.
State any two causes of disagreement between the balance as per bank column of cash book and bank statement.
Answer:
(a) Cheques issued but not yet presented for payment.
(b) Cheques deposited into bank but not yet credited.


Question 4.
Give any two expenses which may be paid by the banker as per standing instruction.
Answer:
Insurance premium, loan instalment, etc., paid as per standing instructions.

Question 6.
Do you agree on the following statements? Write “yes” if you agree, and write “no” if you disagree.
(a) Bank reconciliation statement is prepared by the banker.
(b) Adjusting the cash book before preparing the bank reconciliation statement is compulsory.
(c) Credit balance as per bank statement is an overdraft.
(d) Bank charges debited by the bank increases the balance as per bank statement.
(e) Bank reconciliation statement is prepared to identify the causes of differences between balance as per bank column of the cash book and balance as per cash column of the cash book.
Answer:
(a) No
(b) No
(c) No
(d) No
(e) Yes

III. Short Answer Questions

Question 1.
Give any three reasons for preparing bank reconciliation statement.
Answer:
The main reasons for preparing bank reconciliation statement are:

  1. To identify the reasons for the difference between the bank balance as per the cash book and bank balance as per bank statement.
  2. To identify the delay in the clearance of cheques.
  3. To ascertain the correct balance of bank column of cash book.