When balance as per Cash Book is the starting point, interest charged by Bank is:

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 'B'. Can you explain this answer?

Question

When balance as per Cash Book is the starting point, interest charged by Bank is:

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 'B'. Can you explain this answer?

Answer

B is the answer.
This is because the interest charged is shown in pass book, but the cash book hasn't deducted it.

Answer

Correct Answer is B
The passbook has been decreased due to bank charges.
But the accountant doesn't know about that....
so we will deduct the amount to make the cash book equal to passbook.

Answer

Explanation:

Introduction:
In the process of preparing a bank reconciliation statement, it is important to consider any adjustments that need to be made to the balance as per the Cash Book. One such adjustment is for interest charged by the bank.

Bank Reconciliation Statement:
A bank reconciliation statement is a statement that explains the differences between the balance as per the Cash Book (maintained by the company) and the balance as per the bank statement (prepared by the bank). It helps to identify any errors or discrepancies and ensures that the records of the company and the bank are in agreement.

Interest Charged by Bank:
When the bank charges interest on an overdraft or loan, it is considered an expense for the company. The bank deducts this interest from the company's account, reducing the available balance. Therefore, when preparing the bank reconciliation statement, the interest charged by the bank needs to be subtracted from the balance as per the Cash Book.

Adjustment in Bank Reconciliation Statement:
The bank reconciliation statement is prepared by listing the items that need to be adjusted to reconcile the balances. In the case of interest charged by the bank, it is subtracted from the balance as per the Cash Book because it reduces the available balance. This adjustment is necessary to ensure that the balance as per the Cash Book matches the balance as per the bank statement.

Correct Answer:
The correct answer is option 'B' - Interest charged by the bank is subtracted in the bank reconciliation statement. This is because interest charged by the bank is considered an expense for the company and reduces the available balance. Therefore, it needs to be adjusted by subtracting it from the balance as per the Cash Book in the bank reconciliation statement.

Conclusion:
In conclusion, interest charged by the bank is subtracted in the bank reconciliation statement as it is considered an expense for the company. This adjustment ensures that the balance as per the Cash Book matches the balance as per the bank statement.

Similar CA Foundation Doubts

When balance as per Cash Book is the starting point, interest charged by Bank is

When the balance as per Pass Book is the starting point, direct payment by bank are

When balance as per Cash Book is the starting point, uncollected cheques are

When balance as per Cash Book is the starting point, uncollected cheques are

When the balance as per Pass Book is the starting point, uncollected cheques are

Top Courses for CA FoundationView all

Quantitative Aptitude for CA Foundation

Accounting for CA Foundation

Business Laws for CA Foundation

Business Economics for CA Foundation

Mock Tests & Past Year Papers for CA Foundation

Top Courses for CA Foundation

Top Courses for CA Foundation

Suggested Free Tests

Related Content

CA Foundation Courses

Other Courses

How To Prepare?

Other Exams

Company