Question 6 of 50intermediate💡 UnderstandFill in the Blanks1 mark

If the cash book balance is taken as starting point the items which make the cash book balance smaller than the passbook must be ...for the purpose of reconciliation.

Correct Answer

added

Exercise: Test Your Understanding - I | Q: II(v) | (Page 7)
For More Understanding

Explanation

When preparing a Bank Reconciliation Statement starting with the cash book balance, the goal is to arrive at the passbook balance. If certain items make the cash book balance smaller than the passbook balance (such as cheques issued but not yet presented for payment, or interest credited by the bank), these items must be ADDED to the cash book balance to reconcile it with the passbook. The logic is: Cash Book Balance + Additions = Passbook Balance when the cash book shows a lower balance than the passbook.

Solution Steps

  1. Step 1: Identify that cash book balance is the starting point for reconciliation.

  2. Step 2: Recognize that items making cash book balance smaller than passbook need to be adjusted.

  3. Step 3: Apply the rule: to increase the cash book balance to match the higher passbook balance, items must be added.

PreviousNext