Accountancy MCQs
Topic Notes: Accountancy
General Description
Plato
- Biography: Ancient Greek philosopher (427–347 BCE), student of Socrates and teacher of Aristotle, founder of the Academy in Athens.
- Important Ideas:
- Theory of Forms
- Philosopher-King
- Ideal State
1
What does a credit balance on a bank statement represent from the perspective of the account holder?
Answer:
Favorable balance
A bank statement is prepared from the bank's perspective. When the bank owes money to the customer (a deposit), it records it as a liability, which is a credit balance. Therefore, a credit balance on a bank statement indicates that the customer has funds available, representing a favorable balance.
2
In a bank passbook, which column is used to record withdrawals made by the account holder?
Answer:
Debit
From the perspective of the bank, a customer's deposit is a liability, and a withdrawal is a reduction of that liability. Therefore, when a customer withdraws money, the bank debits the customer's account because it reduces the amount the bank owes to the customer. Conversely, deposits are credited to the customer's account as they increase the bank's liability.
3
What is the term for the document provided by a bank to a customer that details all deposits and withdrawals made in their account?
Answer:
Pass Book
A Pass Book, or bank statement, is a copy of the customer's account as maintained in the bank's ledger. It serves as a record for the depositor to track their transactions and reconcile their own cash book records with the bank's records.
4
Is it correct that the debit side of the cash book (bank column) is compared with the credit column of the bank statement during reconciliation?
Answer:
True
Because the bank statement is a mirror image of the entity's records from the bank's perspective, a debit in the company's cash book (representing an increase in cash) corresponds to a credit in the bank's records (representing an increase in the bank's liability to the customer).
5
What is the formal name for the copy of a customer's account maintained in the bank's ledger?
Answer:
Bank statement
A bank statement is a periodic record provided by a bank to its account holder. It serves as a copy of the customer's account as it appears in the bank's own ledger, detailing all transactions processed during a specific period.
6
In the context of bank reconciliation, when a bank balance increases, how is this recorded in the Cash Book and the Pass Book?
Answer:
Cash Book; Pass Book
In the Cash Book, a bank deposit increases the asset balance, which is recorded as a debit. Conversely, the bank views the customer's deposit as a liability, so they credit the customer's account in the Pass Book. Therefore, an increase in bank balance is debited in the Cash Book and credited in the Pass Book.
7
Who is responsible for maintaining the bank statement provided to a customer?
Answer:
Bank
A bank statement is an official document issued by the bank that summarizes all transactions in a customer's account over a specific period. It is prepared and maintained by the bank to provide the account holder with a record of their deposits, withdrawals, and balance.
8
What document does a bank provide to a customer upon the opening of a new account?
Answer:
Bank- pass Book
A bank passbook is a physical or digital record provided by a bank to its customers. It serves as a summary of all transactions, including deposits and withdrawals, made in the customer's account. It acts as a primary source document for the customer to reconcile their bank balance with their own cash book records.
9
What is the term for a cheque that has two parallel lines drawn across its face?
Answer:
A crossed cheque
Crossing a cheque by drawing two parallel lines across its face indicates that the cheque cannot be cashed directly at the bank counter. Instead, it must be deposited into a bank account, which provides a security measure to track the recipient of the funds.
10
Who is responsible for maintaining the bank statements?
Answer:
Depositors/Customers
While banks generate and issue the bank statement, the depositor or customer is the party who keeps and maintains these statements for their own accounting records. The customer uses these statements to perform bank reconciliations to ensure their cash book matches the bank's records.