Skip to content

CA Foundation · Accounting · Bank Reconciliation Statement

Which of the following explains why a standing instruction for insurance premium paid directly by the bank causes a difference between the two balances?

A standing instruction payment creates a difference because the bank has already debited the account, while the firm has not yet recorded it in its cash book. The firm learns of it only from the pass book and must then pass an entry.

  1. AThe firm has not yet recorded the payment in its cash book, while the bank has already debited the accountCorrect
  2. BThe bank has not yet recorded the payment, while the firm has already credited its cash book
  3. CThe firm issued a cheque that has not been presented
  4. DThe bank made an error in posting the amount

Explanation

On a standing instruction the bank debits the account directly and the firm learns of it only from the pass book. Until the cash book is updated, the cash book balance is higher than the pass book balance. The payment is therefore an omission in the cash book, not a bank error.

Did you get it right without looking?

One question tells you little. A timed set on Bank Reconciliation Statement shows your real accuracy, how long you take and where you lose marks.

Practise Bank Reconciliation StatementFree diagnostic mock

More Bank Reconciliation Statement questions