Understanding Unpresented Cheques in Bank Reconciliation

Steps:

• Identify unpresented cheque as a cheque issued by the company but not yet presented to the bank for payment.
• In bank reconciliation, subtract unpresented cheques from the bank statement balance to match the cash book balance.
• Evaluate each statement against standard accounting definitions for accuracy.
• Select the option that correctly identifies the true statements based on reconciliation rules.

Why C is correct:

• Statements 2 and 3 align with the definition: unpresented cheques reduce the bank balance in reconciliation and do not affect the payee until presented.

Why the others are wrong:

• A includes statement 1, which incorrectly states unpresented cheques increase cash balance.
• B relies only on statement 1, which misrepresents their impact on reconciliation.
• D ignores statements 1 and 2, but statement 1 is false while 2 is true.

Not enough information: Statements 1, 2, and 3 are not provided.

Final answer: C