Question

State with reasons whether the following statements are true or false:

I. Interest charged by the bank will be deducted, when the overdraft as per the cash book is the

starting point for making the bank reconciliation statement.

II. If the balance as per cash book and pass book are the same, there is no need to prepare a

reconciliation statement.

III. Depreciation is a non-cash expense and does not result in any cash outflow.

IV. Depreciation cannot be provided in case of loss, in a financial year.

V. Goods worth Rs. 600 taken by proprietor for personal use should be credited to capital

account​

Answer 1

Answer : True

Step-by-step explanation:

Interest charged by bank is an expense for the business. It is credited in the cash book when it is paid by the business, thereby reducing the balance in the cash book (bank column). So, when overdraft as per pass book is the starting point for preparing bank reconciliation statement, interest charged by bank will be deducted to arrive at the balance as per cash book at the end.