Chapter 4: Bank Reconciliation Statement (JAIIB – Paper 3)
1. In a bank reconciliation, which of the following transactions is first recorded in the Cash Book by the business?
A. Bank charges deducted by bank
B. Interest credited by bank
C. Cheque issued to a supplier
D. Direct deposit by a customer
Cheque payments are recorded in the Cash Book by the business when issued, while bank charges, interest, or direct deposits appear first in the Pass Book.
2. Which item usually appears first in the Pass Book and not in the Cash Book until intimation is received?
A. Cheque issued but not presented
B. Cheque deposited but not cleared
C. Cash deposit in hand
D. Bank charges deducted by bank
Bank charges are directly debited by the bank in the Pass Book; they are recorded later in the Cash Book once known to the business.
3. Is the Pass Book a perfect mirror image of the Cash Book?
A. Yes, both always show identical balances
B. No, due to timing differences and unrecorded items
C. Yes, but only for savings accounts
D. Yes, if the account is dormant
The Pass Book is not an exact mirror image of the Cash Book because of differences like unpresented cheques, bank charges, interest, and timing gaps.
4. When a customer deposits a cheque in the bank, how is it recorded in the Cash Book and Pass Book?
A. Debit in Cash Book, Credit in Pass Book
B. Credit in Cash Book, Credit in Pass Book
C. Debit in Cash Book, Debit in Pass Book
D. Credit in Cash Book, Debit in Pass Book
In the Cash Book, bank column is debited when a cheque is deposited. In the Pass Book, the bank shows it as credit because the customer’s account increases.
5. A cheque issued by the business but not yet presented in the bank will cause:
A. Pass Book balance lower than Cash Book balance
B. Both balances equal
C. Cash Book balance lower than Pass Book balance
D. No difference at all
Issued cheques reduce Cash Book balance immediately, but until presented, the Pass Book balance remains unchanged, making it appear higher.
6. Which of the following is NOT a cause for difference between Cash Book and Pass Book balances?
A. Cheques issued but not presented
B. Direct deposits by customers in bank
C. Bank charges not recorded in Cash Book
D. Cash sales recorded in Cash Book
Cash sales are recorded in the Cash Book only, and do not involve the bank directly. Hence, they do not cause any difference between Pass Book and Cash Book balances.
7. The main objective of preparing a Bank Reconciliation Statement is to:
A. Identify reasons for differences between Cash Book and Pass Book
B. Detect frauds in the Cash Book
C. Record all bank transactions in Pass Book
D. Close the Cash Book at year-end
A Bank Reconciliation Statement is prepared to reconcile and explain the differences between Cash Book and Pass Book balances.
8. Which of the following will increase the balance as per the Pass Book but not yet appear in the Cash Book?
A. Cheques issued but not presented
B. Cheques deposited but not cleared
C. Interest credited by bank
D. Bank charges deducted
Interest credited by bank increases Pass Book balance immediately but is recorded later in the Cash Book when intimation is received.
9. If Cash Book balance is ₹50,000 (Dr.) and cheques issued but not presented are ₹10,000, what will be the balance as per Pass Book?
A. ₹40,000
B. ₹60,000
C. ₹50,000
D. ₹70,000
Cheques issued but not presented reduce Cash Book balance but not Pass Book balance. Hence Pass Book shows ₹50,000 + ₹10,000 = ₹60,000.
10. While preparing a Bank Reconciliation Statement, which side do you start with if the problem states “Balance as per Pass Book”?
A. Debit side of Cash Book
B. Credit side of Cash Book
C. Debit side of Pass Book
D. Balance as per Pass Book given in question
Bank Reconciliation always starts with the given balance (Cash Book or Pass Book) as mentioned in the problem, and adjustments are made to reach the other balance.
11. Which of the following is the main need for preparing a Bank Reconciliation Statement?
A. To reconcile differences between Cash Book and Pass Book balances
B. To prepare final accounts
C. To check the accuracy of Pass Book entries
D. To record all bank transactions in the ledger
The primary need for preparing BRS is to identify and reconcile the reasons for differences between Cash Book and Pass Book balances.
12. Bank Reconciliation helps in:
A. Detecting errors in Cash Book
B. Detecting errors in Pass Book
C. Detecting fraud or omission in bank transactions
D. All of the above
Bank Reconciliation serves multiple purposes: detecting errors in Cash Book, verifying Pass Book entries, and identifying fraud or omissions.
13. If balance as per Cash Book is given, which of the following adjustments will be added to arrive at balance as per Pass Book?
A. Cheques issued but not presented
B. Interest credited by bank
C. Bank charges debited by bank
D. Cheques deposited but not cleared
Interest credited by the bank increases Pass Book balance but is not yet in Cash Book, so it is added when reconciling from Cash Book to Pass Book.
14. Balance as per Cash Book is ₹25,000. Cheques issued but not presented = ₹5,000; Bank charges not recorded in Cash Book = ₹500. What will be balance as per Pass Book?
A. ₹29,500
B. ₹25,500
C. ₹29,500 – ₹500 = ₹29,000
D. ₹30,000
Start with ₹25,000 (Cash Book). Add unpresented cheques ₹5,000 → ₹30,000. Deduct bank charges ₹500 → ₹29,500. Correct balance = ₹29,500 (but after charges = ₹29,000).
15. When extracts of both Cash Book and Pass Book are given, how is the Bank Reconciliation Statement prepared?
A. By identifying common items and listing only the differences
B. By copying all transactions from Cash Book to Pass Book
C. By preparing trial balance of both books
D. By comparing balances only without adjustments
When extracts of both books are available, reconciliation is done by eliminating common items and adjusting only the differing transactions to find the correct balance.
16. If Cash Book balance is ₹40,000, bank charges of ₹500 and interest credited of ₹1,000 are yet to be recorded in Cash Book, what will be the adjusted Cash Book balance?
17. While adjusting the Cash Book balance, which of the following is deducted?
A. Interest credited by bank
B. Dividend collected by bank
C. Direct deposit by customer
D. Bank charges debited by bank
Bank charges reduce the bank balance and hence are deducted when adjusting the Cash Book.
18. One advantage of preparing a Bank Reconciliation Statement is that it:
A. Helps in early detection of errors and frauds
B. Eliminates the need for Cash Book
C. Ensures that Pass Book is not required
D. Guarantees no cheque will bounce
BRS identifies errors, omissions, or frauds quickly and ensures correctness of balances.
19. Which of the following is NOT an advantage of Bank Reconciliation Statement?
A. Helps in detecting errors and frauds
B. Keeps track of unpresented cheques
C. Ensures immediate collection of cheques
D. Assists in maintaining accurate records
BRS cannot ensure immediate collection of cheques; it only highlights such pending items.
20. Which statement best explains why Adjusted Cash Book is prepared before reconciliation?
A. To match Pass Book with Cash in Hand
B. To incorporate bank entries not yet recorded in Cash Book
C. To verify all ledger balances
D. To update the Pass Book for missing entries
Adjusted Cash Book is prepared to first record missing items (bank charges, interest, direct deposits, etc.) before starting reconciliation with Pass Book.
