A cheque issued by a business has not yet been presented to the bank for payment. How does this item usually affect the bank reconciliation?
Correct answer: B. The cash book balance is lower than the bank statement balance
- A. The bank statement balance is lower than the cash book balance
- B. The cash book balance is lower than the bank statement balance
- C. Both balances are reduced by the same amount
- D. Neither balance includes the cheque amount
Explanation
The business records the cheque in its cash book when it is issued, but the bank records it only when the cheque is presented. Therefore, the cash book balance is lower than the bank statement balance until presentation.
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About Bank Reconciliation and Control Accounts
Bank reconciliation explains differences between the cash book and bank statement through unpresented cheques, outstanding deposits, bank charges, direct payments, credited amounts and recording errors. Control accounts summarise receivables and payables ledgers, and their balances are reconciled with individual accounts to locate discrepancies.
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