CIMA BA3 · Chapter 6
Bank reconciliations MCQs with Answers
10 multiple-choice questions on Bank reconciliations for CIMA BA3 Fundamentals of Financial Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
A business's cash book shows a debit balance of $1,800. It is discovered that a standing order payment of $150 was entered twice in the cash book. What is the corrected cash book balance?
- A) $1,500 debit
- B) $1,650 debit
- C) $1,950 debit
- D) $2,100 debit
Show answer & explanation
Answer: C) $1,950 debit
The payment was credited twice, so the balance is understated by one payment. Corrected balance = $1,800 + $150 = $1,950 debit.
Question 2
In a bank reconciliation, what are unpresented cheques?
- A) Cheques written by the business and recorded in the cash book but not yet cleared by the bank
- B) Cheques received from customers and banked but not yet credited by the bank
- C) Cheques that have been returned unpaid by the bank
- D) Cheques that the bank has paid but which are not yet recorded in the cash book
Show answer & explanation
Answer: A) Cheques written by the business and recorded in the cash book but not yet cleared by the bank
Unpresented cheques are payments already recorded in the cash book that have not yet passed through the bank account. They are a timing difference and are adjusted for in the reconciliation, not in the cash book.
Question 3
When preparing a bank reconciliation, which of the following items requires an adjustment to the cash book?
- A) Unpresented cheques
- B) Outstanding lodgements
- C) Bank charges shown on the bank statement but not yet recorded by the business
- D) A cheque wrongly debited to the business's account by the bank
Show answer & explanation
Answer: C) Bank charges shown on the bank statement but not yet recorded by the business
Bank charges are genuine transactions that the business has not yet recorded, so the cash book must be updated. Unpresented cheques and outstanding lodgements are timing differences, and a bank error must be corrected by the bank; all three are dealt with in the reconciliation statement.
Question 4
The bank statement of a business shows a balance of $6,420 in hand. There are unpresented cheques of $2,180 and outstanding lodgements of $1,350. There are no other differences. What is the balance in the cash book?
- A) $2,890 debit
- B) $5,590 debit
- C) $7,250 debit
- D) $9,950 debit
Show answer & explanation
Answer: B) $5,590 debit
Cash book balance = balance per bank - unpresented cheques + outstanding lodgements = $6,420 - $2,180 + $1,350 = $5,590 debit (in hand). Unpresented cheques have reduced the cash book but not yet the bank balance; lodgements have increased the cash book but not yet the bank balance.
Question 5
A cash book shows a debit balance of $3,870. The bank statement shows bank charges of $95, a credit transfer from a customer of $640 and a direct debit of $210, none of which have been recorded in the cash book. What is the corrected cash book balance?
- A) $2,925
- B) $4,205
- C) $4,395
- D) $4,415
Show answer & explanation
Answer: B) $4,205
Corrected cash book = $3,870 - bank charges $95 + credit transfer $640 - direct debit $210 = $4,205 debit.
Question 6
The bank statement of a business shows an overdraft of $1,240. There are unpresented cheques of $860 and outstanding lodgements of $2,300. What is the balance in the cash book?
- A) $200 overdrawn (credit)
- B) $200 in hand (debit)
- C) $2,680 overdrawn (credit)
- D) $4,400 overdrawn (credit)
Show answer & explanation
Answer: B) $200 in hand (debit)
Start with the bank balance as a negative figure: -$1,240. Deduct unpresented cheques (already in the cash book): -$1,240 - $860 = -$2,100. Add outstanding lodgements: -$2,100 + $2,300 = $200. The cash book therefore shows $200 in hand.
Question 7
A business's cash book shows an overdraft of $2,150. Comparison with the bank statement at the same date shows: (1) A customer's cheque for $480 has been dishonoured; this appears on the bank statement but has not been recorded in the cash book. (2) Bank interest of $65 appears on the bank statement but has not been recorded in the cash book. (3) Cheques of $1,930 recorded in the cash book have not yet been presented to the bank. (4) A lodgement of $3,100 recorded in the cash book has not yet been credited by the bank. (5) The bank has made an error: it debited the business's account with a $250 cheque drawn by another customer of the bank. The bank has not yet corrected this error, so it is included in the bank statement balance. What balance is shown on the bank statement?
- A) $3,615 overdrawn
- B) $2,695 overdrawn
- C) $1,525 overdrawn
- D) $4,115 overdrawn
Show answer & explanation
Answer: D) $4,115 overdrawn
First correct the cash book for items (1) and (2): -$2,150 - $480 - $65 = -$2,695 (overdrawn $2,695). Then reconcile to the bank statement: add back unpresented cheques $1,930 (not yet deducted by the bank), deduct the uncredited lodgement $3,100 (not yet added by the bank) and deduct the uncorrected bank error $250 (wrongly deducted by the bank): -$2,695 + $1,930 - $3,100 - $250 = -$4,115. The bank statement shows an overdraft of $4,115. Ignoring the bank error gives $3,865 overdrawn, which is not an option.
Question 8
Which bank balance is reported in the statement of financial position?
- A) The balance shown on the bank statement at the reporting date
- B) The cash book balance before any adjustments
- C) The cash book balance after correcting it for items such as bank charges and errors in the cash book
- D) The average of the bank statement balance and the cash book balance
Show answer & explanation
Answer: C) The cash book balance after correcting it for items such as bank charges and errors in the cash book
The statement of financial position shows the corrected cash book balance, because it records all the business's transactions up to the reporting date. The bank statement balance is distorted by timing differences such as unpresented cheques and outstanding lodgements.
Question 9
A cheque received from a customer and banked is returned unpaid (dishonoured) by the customer's bank. What entry is required in the business's books?
- A) Debit Bank, Credit Receivables
- B) Debit Receivables, Credit Bank
- C) Debit Irrecoverable debts expense, Credit Bank
- D) Debit Sales, Credit Bank
Show answer & explanation
Answer: B) Debit Receivables, Credit Bank
When the cheque was banked, bank was debited and receivables credited. If the cheque is dishonoured that entry is reversed: the customer owes the money again (debit receivables) and the bank balance falls (credit bank). The debt is only written off if it is later judged irrecoverable.
Question 10
Why is it good practice to prepare bank reconciliations regularly?
- A) To identify errors and omissions in the cash book or bank statement and help detect fraud
- B) To calculate the interest the bank will charge
- C) To remove the need to keep a cash book
- D) To determine the profit for the period
Show answer & explanation
Answer: A) To identify errors and omissions in the cash book or bank statement and help detect fraud
Reconciling the cash book to the bank statement confirms that the cash book is complete and accurate, highlights bank errors and unrecorded items, and acts as a control that helps detect misappropriation of cash.