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When the balance as per Pass Book is the starting point, direct payment by bank are:
- a)added in the bank reconciliation statement
- b)subtracted in the bank reconciliation statement
- c)Not required to be adjusted in the bank reconciliation statement.
- d)Neither of the above.
Correct answer is option 'A'. Can you explain this answer?
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When the balance as per Pass Book is the starting point, direct paymen...
Bank Reconciliation Statement and Direct Payments by Bank
Bank reconciliation statement is a statement that reconciles the bank balance as per the cash book with the bank balance as per the pass book. It helps in identifying the differences between the two balances and ensures that the records of the company and the bank are in agreement.
Direct Payments by Bank
Direct payments by bank refer to the payments made by the bank on behalf of the company. These payments are directly made by the bank without the involvement of the company. Examples of direct payments include payment of bank charges, interest charges, direct debits, etc.
Treatment of Direct Payments by Bank in the Bank Reconciliation Statement
When the balance as per the pass book is taken as the starting point in the bank reconciliation statement, direct payments by bank need to be added.
Reason for Adding Direct Payments by Bank
The reason for adding direct payments by bank is to adjust the balance as per the pass book to reflect the correct balance as per the cash book. Since these payments are made by the bank on behalf of the company, they have not been recorded in the cash book. Therefore, they need to be added to the balance as per the pass book to account for these payments.
Example
Let's understand this with an example. Suppose the balance as per the pass book is $10,000 and there are direct payments made by the bank of $500 for bank charges and $200 for interest charges. In this case, the balance as per the cash book will be $10,000 - $500 - $200 = $9,300.
Therefore, in the bank reconciliation statement, the direct payments by bank of $500 and $200 will be added to the balance as per the pass book to arrive at the balance as per the cash book.
Conclusion
In conclusion, when the balance as per the pass book is the starting point in the bank reconciliation statement, direct payments by bank are added to adjust the balance as per the pass book to reflect the correct balance as per the cash book. This ensures that the records of the company and the bank are in agreement.
Bank reconciliation statement is a statement that reconciles the bank balance as per the cash book with the bank balance as per the pass book. It helps in identifying the differences between the two balances and ensures that the records of the company and the bank are in agreement.
Direct Payments by Bank
Direct payments by bank refer to the payments made by the bank on behalf of the company. These payments are directly made by the bank without the involvement of the company. Examples of direct payments include payment of bank charges, interest charges, direct debits, etc.
Treatment of Direct Payments by Bank in the Bank Reconciliation Statement
When the balance as per the pass book is taken as the starting point in the bank reconciliation statement, direct payments by bank need to be added.
Reason for Adding Direct Payments by Bank
The reason for adding direct payments by bank is to adjust the balance as per the pass book to reflect the correct balance as per the cash book. Since these payments are made by the bank on behalf of the company, they have not been recorded in the cash book. Therefore, they need to be added to the balance as per the pass book to account for these payments.
Example
Let's understand this with an example. Suppose the balance as per the pass book is $10,000 and there are direct payments made by the bank of $500 for bank charges and $200 for interest charges. In this case, the balance as per the cash book will be $10,000 - $500 - $200 = $9,300.
Therefore, in the bank reconciliation statement, the direct payments by bank of $500 and $200 will be added to the balance as per the pass book to arrive at the balance as per the cash book.
Conclusion
In conclusion, when the balance as per the pass book is the starting point in the bank reconciliation statement, direct payments by bank are added to adjust the balance as per the pass book to reflect the correct balance as per the cash book. This ensures that the records of the company and the bank are in agreement.
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When the balance as per Pass Book is the starting point, direct paymen...
Explanation:
When the balance as per Pass Book is the starting point, direct payment by bank can be treated in the following ways in the bank reconciliation statement:
The correct answer is option A, where direct payments made by the bank are added in the bank reconciliation statement. This is because when the balance as per Pass Book is taken as the starting point, any direct payments made by the bank would not be reflected in the Pass Book balance. Therefore, to reconcile the difference between the Pass Book balance and the bank statement balance, these direct payments need to be added back.
In summary, when the balance as per Pass Book is the starting point, direct payments made by the bank are added in the bank reconciliation statement to reconcile the difference between the Pass Book balance and the bank statement balance.
When the balance as per Pass Book is the starting point, direct payment by bank can be treated in the following ways in the bank reconciliation statement:
- Option A: Added in the bank reconciliation statement
- Option B: Subtracted in the bank reconciliation statement
- Option C: Not required to be adjusted in the bank reconciliation statement
- Option D: Neither of the above
The correct answer is option A, where direct payments made by the bank are added in the bank reconciliation statement. This is because when the balance as per Pass Book is taken as the starting point, any direct payments made by the bank would not be reflected in the Pass Book balance. Therefore, to reconcile the difference between the Pass Book balance and the bank statement balance, these direct payments need to be added back.
In summary, when the balance as per Pass Book is the starting point, direct payments made by the bank are added in the bank reconciliation statement to reconcile the difference between the Pass Book balance and the bank statement balance.
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When the balance as per Pass Book is the starting point, direct payment by bank are:a)added in the bank reconciliation statementb)subtracted in the bank reconciliation statementc)Not required to be adjusted in the bank reconciliation statement.d)Neither of the above.Correct answer is option 'A'. Can you explain this answer?
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