Q.Select the Correct Answer: 1. A bank reconciliation statement is prepared by:
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Start your 14-day free trial to unlock the full solution →Answers: 1-(c), 2-(c), 3-(a), 4-(b), 5-(d), 6-(b). A bank reconciliation statement is prepared by the account holder to reconcile the cash book (bank column) with the passbook.
| # | Answer |
|---|---|
| 1 | (c) Account holder in a bank |
| 2 | (c) Both passbook and cash book |
| 3 | (a) Copy of customer Account |
| 4 | (b) Credit balance in cash book |
| 5 | (d) Both (b) and (c) |
| 6 | (b) Reconcile the difference between the bank balance shown by the cash book and bank passbook |
1. A bank reconciliation statement (BRS) is prepared by the account holder who keeps the account, to explain the difference between the bank balance as per their own cash book and the balance as per the bank's passbook. Creditors and debtors are outside parties with no role in it, and the bank only issues the passbook rather than reconciling the customer's records - so (c) is correct.
2. A BRS can be started from either the cash book balance or the passbook balance, and its whole purpose is to reconcile the two, so both balances are involved - option (c). Starting from a single balance in isolation (a) or (b) is incomplete, and (d) is clearly wrong since both balances are used.
3. The passbook is a copy of the customer's account as it appears in the books (ledger) of the bank - option (a). The bank column of the cash book records the same transactions but is maintained by the account holder, so the two are mirror images, not copies of each other.
4. An unfavourable bank balance is a bank overdraft. From the account holder's viewpoint the bank becomes a creditor, so the bank column of the cash book shows a credit balance - option (b). The same overdraft appears as a debit balance in the passbook, which is why (a) is wrong; a debit balance in the cash book (c) is actually a favourable balance.
5. A favourable balance means money is held with the bank: a debit balance in the cash book (asset) and, from the bank's side, a credit balance in the passbook. Both option (b) and option (c) describe the same favourable position, so (d) Both (b) and (c) is correct. Option (a) would indicate an overdraft. …
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