A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 30 - 31 of 93

Question 30

Question

MCQ▾

Which of the following will be recorded as Contra Entry?

Choices

Choice (4)

a.

A cheque received from Y a week earlier lodged into bank

b.

A cheque received from X lodged into bank on the same day

c.

Withdrew from bank for personal use

d.

A customer directly deposited the money in our bank account

Answer

a.

Explanation

When cash is deposited into bank, it increases the bank balance and reduces the cash balance. Hence, it affects the cash column as well as the bank column. As such the same amount is recorded on the debit side as well as the credit side. On the debit side ‘To Cash A/c’ is written and the amount is recorded in the bank column. On the credit side ‘By Bank A/c’ is written and the amount is recorded in the cash column.

Debit bank A/c (As bank is receiving the cash)

To Credit cash A/c (As cash is going out)

When cheques are deposited with the bank on a future date, a contra entry, as in the case of cash deposited in the bank will be passed.

Question 31

Question

MCQ▾

A bank reconciliation statement is prepared to ascertain the causes of differences between

Choices

Choice (4)

a.

The balance as shown by the bank column of cash book with the balance of the passbook

b.

The balance as shown by the cash column of cash book with balances of the passbook

c.

The balance as shown by the cheque book and passbook

d.

The balance as shown by the cash column of the cash book with that shown by its bank column

Answer

a.

Explanation

  • All the firms open a current account with a Bank and in order to record the transactions entered with the bank, maintain a Bank Column in the Cash Book. Bank also opens a separate account for each firm in its ledger and enters all the transactions in it. This copy of the firm՚s account supplied by the bank is called bank passbook or bank statement. All the transactions entered with the bank are recorded in both the books, money is deposited into the bank, the firm enters it on the debit side of the bank column of the cash book and at the same time bank also enters it on the credit side of the firm՚s there should be no difference between the balance depicted by the cash book and the pass book. The balance of the two books must tally with each other, because when the account maintained by the bank. On the other hand, when money is withdrawn from the bank, firm enters it on the credit side of the bank column of cash book and at the same time bank also enters it on the debit side of the firm՚s account in its books.
  • Hence, all the entries recorded on the debit side of the cash book must tally with the entries recorded on the credit side of the pass book and conversely, all the entries recorded on the credit side of the cash book must tally with the entries recorded on the debit side of the pass book. Therefore, at any time, the bank balance shown by the cash book must tally with the balance shown by the passbook. However, sometimes it so happens, that these two balances do not tally. This is, because on a certain date it is possible that there may be some entries which may have been recorded in the cash book but not in the passbook and vice versa.

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