Bank Reconciliation Statement - Class 11 Accountancy - Chapter 5 - Notes, NCERT Solutions & Extra Questions
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State the need for the preparation of bank reconciliation statement?
The need for the preparation of a bank reconciliation statement arises to ensure accuracy between the bank balance as recorded in the firm's cash book and the balance shown by the bank passbook. It helps in identifying and explaining differences due to timing gaps and errors either by the business or the bank. This reconciliation ensures that all transactions are completely recorded, identifies discrepancies, prevents fraud, and assists in the preparation of accurate financial statements.
What is a bank overdraft?
A bank overdraft is a situation where a business or individual withdraws more money from their bank account than is actually available, resulting in a negative balance. Essentially, it is a form of short-term borrowing from the bank. In the cash book, this appears as a credit balance because the account holder owes money to the bank. Conversely, in the bank statement, it appears as a debit balance. Overdrafts are commonly used to manage short-term cash flow issues.
Briefly explain the statement 'wrongly debited by the bank' with the help of an example.
The statement "wrongly debited by the bank" refers to an erroneous deduction from a customer's account by the bank. For example, suppose a customer, Mr. X, notices a debit of ₹500 in his passbook labeled as "service charges", but he never availed that service. Upon investigation, it is found that the bank mistakenly applied charges meant for another account to Mr. X’s account. Such errors cause discrepancies between the bank passbook and the customer's cash book, necessitating reconciliation.
State the causes of difference occurred due to time lag.
The causes of differences due to time lag include:
1. Cheques Issued but Not Presented: Firm credits the cash book, but the bank debits only when cheques are presented.
2. Cheques Paid into Bank but Not Yet Collected: Firm debits the cash book, but the bank credits only upon collection.
3. Direct Debits by Bank: Bank fees or charges deducted without the firm's immediate knowledge.
4. Direct Deposits into Bank: Debtors deposit directly, not immediately recorded by the firm.
5. Interest and Dividends Collected by Bank: Firm unaware until bank statement arrives.
6. Dishonoured Cheques/Bills: Bank debits these; firm unaware until bank notification.
These timing discrepancies result in differences between the cash book and passbook balances.
Briefly explain the term 'favourable balance as per cash book'.
A favourable balance as per cash book indicates the business has deposited more money into its bank account than it has withdrawn, reflecting a positive or debit balance in the bank column of the cash book. This means the business has available funds in the bank. Typically, this balance should match the credit balance in the bank passbook, ensuring that the business's bank transactions are correctly recorded and that funds are managed efficiently.
Enumerate the steps to ascertain the correct cash book balance.
To ascertain the correct cash book balance, follow these steps:
1. Ensure the cash book is updated with all transactions.
2. Compare entries in the cash book with the bank statement.
3. Identify discrepancies such as unrecorded bank charges, direct deposits, or unpresented cheques.
4. Adjust the cash book for errors and omissions, including:
- Insufficiently recorded transactions.
- Mispostings.
- Unrecorded bank charges or interest.
5. Recalculate the balance in the cash book after making all necessary adjustments.
What is a bank reconciliation statement. Why is it prepared?
To ascertain the correct cash book balance, follow these steps:
1. Compare Entries: Compare the entries in the cash book with those in the bank statement (passbook).
2. Identify Differences: Identify the items causing differences between the two balances, such as cheques issued but not presented, cheques deposited but not credited, direct bank entries, and bank charges.
3. Adjust for Errors: Rectify any errors found in the cash book, such as wrong entries or amounts.
4. Include Missing Entries: Add any missing entries to the cash book, such as interest credited, bank charges, or direct deposits.
5. Recalculate Balance: Recalculate the balance of the cash book after adjustments, ensuring accuracy by checking all entries.
6. Prepare Reconciliation Statement: Prepare the bank reconciliation statement to reconcile the adjusted cash book balance with the bank statement balance.
This structured approach ensures the cash book reflects the correct and updated bank balance.
Explain the reasons where the balance shown by the bank passbook does not agree with the balance as shown by the bank column of the cash book.
The balance shown by the bank passbook often does not agree with the balance as shown by the bank column of the cash book due to several reasons:
1. Timing Differences: Transactions may be recorded at different times. Examples include cheques issued but not yet presented for payment and cheques deposited but not yet collected by the bank.
2. Direct Entries by the Bank: The bank might make entries directly, such as interest and dividends credited or direct debits for charges (e.g., bank fees).
3. Errors: Mistakes can occur either in the bank's records or the business's records. Errors made by either party, such as wrong entries or omissions, cause discrepancies.
4. Standing Instructions: Payments made by the bank on behalf of customers based on standing instructions (e.g., utility bills).
5. Dishonoured Cheques: Deposits or bills discounted but later dishonoured are debited by the bank, differing from the cash book records.
Explain the process of preparing bank reconciliation statement with amended cash balance.
To prepare a Bank Reconciliation Statement with an amended cash balance, follow these steps:
1. Identify and record differences: Find discrepancies between the cash book and bank statement.
2. Adjust the cash book balance:
- Add entries missing in the cash book, such as direct deposits by customers and interest credited by the bank.
- Deduct charges and payments not recorded in the cash book, such as bank fees and direct debits by the bank.
3. Prepare adjusted cash book: Update the cash book balance with the identified differences to get the amended balance.
4. Compare with bank statement: Use the adjusted cash book balance to reconcile with the bank statement, accounting for any remaining discrepancies.
5. Prepare final reconciliation: List the amended cash balance and remaining differences to find the final reconciled balance.
This ensures the cash book is accurate before reconciliation.
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From the following particulars, prepare a bank reconciliation statement as at March 31,2017 .
(i) Balance as per cash book ₹ 3,200
(ii) Cheque issued but not presented for payment ₹ 1,800
(iii) Cheque deposited but not collected upto March 31, 2014 ₹ 2,000
(iv) Bank charges debited by bank ₹ 150
Bank Reconciliation Statement as on March 31, 2017
Particulars | Amount (₹) | Amount (₹) |
---|---|---|
Balance as per cash book | 3,200 | |
Add: Cheque issued but not presented for payment | 1,800 | |
Less: Cheque deposited but not collected up to March 31, 2014 | 2,000 | |
Less: Bank charges debited by bank | 150 | |
Balance as per passbook | 2,850 |
Explanation:
Balance as per cash book: ₹ 3,200
Cheque issued but not presented for payment increases the balance as per passbook: ₹ 1,800
Cheque deposited but not collected decreases the balance as per passbook: ₹ 2,000
Bank charges debited by bank reduces the balance: ₹ 150
On March 31, 2017 the cash book showed a balance of ₹ 3,700 as cash at bank, but the bank passbook made up to same date showed that cheques for ₹‚ 700 , ₹ 300 and ₹ 180 respectively had not presented for payment, Also, a cheque amounting to ₹ 1,200 deposited into the account had not been credited. Prepare a bank reconciliation statement.
Bank Reconciliation Statement as on March 31, 2017
Particulars | (+) Amount ₹ | (-) Amount ₹ |
---|---|---|
Balance as per Cash Book | 3,700 | |
Cheques issued but not yet presented | 700 | |
Cheques issued but not yet presented | 300 | |
Cheques issued but not yet presented | 180 | |
Cheque deposited but not yet credited | 1,200 | |
Balance as per Passbook | 4,220 |
Therefore, the balance as per the bank passbook is ₹ 4,220.
Explanation:
Cheques issued but not yet presented for payment will result in a decrease of the balance in the passbook.
Cheques deposited but not credited by the bank will increase the balance in the passbook.
The cash book shows a bank balance of ₹ 7,800 . On comparing the cash book with passbook the following discrepancies were noted:
(a) Cheque deposited in bank but not credited ₹ 3,000
(b) Cheque issued but not yet present for payment ₹ 1,500
(c) Insurance premium paid by the bank ₹ 2,000
(d) Bank interest credit by the bank ₹ 400
(e) Bank charges ₹ 100
(d) Directly deposited by a customer ₹ 4,000
Bank Reconciliation Statement
Particulars:
Balance as per cash book: ₹ 7,800
Add:
Cheques issued but not yet presented for payment: ₹ 1,500
Bank interest credited by the bank: ₹ 400
Amount directly deposited by a customer: ₹ 4,000
Total Additions: ₹ 5,900
Less:
Cheques deposited but not yet credited: ₹ 3,000
Insurance premium paid by the bank: ₹ 2,000
Bank charges: ₹ 100
Total Deductions: ₹ 5,100
Balance as per Passbook: ₹ (7,800 + 5,900 - 5,100) = ₹ 8,600
Bank Reconciliation Statement of XYZ as on [Date]
Particulars | Amount ₹ (+) | Amount ₹ (-) |
---|---|---|
Balance as per cash book | 7,800 | |
Add: | ||
Cheques issued but not yet presented for payment | 1,500 | |
Bank interest credited by the bank | 400 | |
Amount directly deposited by a customer | 4,000 | |
Total Additions: | 5,900 | |
Less: | ||
Cheques deposited but not yet credited | 3,000 | |
Insurance premium paid by the bank | 2,000 | |
Bank charges | 100 | |
Total Deductions: | 5,100 | |
Balance as per passbook: | 8,600 |
Final Balance as per Passbook: ₹ 8,600
Bank balance of ₹ 40,000 showed by the cash book of Atul on December 31, 2016. It was found that three cheques of ₹ 2,000 , ₹ 5,000 and ₹ 8,000 deposited during the month of December were not credited in the passbook till January 02, 2017. Two cheques of ₹ 7,000 and ₹ 8,000 issued on December 28, were not presented for payment till January 03, 2017. In addition to it bank had credited Atul for ₹ 325 as interest and had debited him with ₹ 50 as bank charges for which there were no corresponding entries in the cash book.
Prepare a bank reconciliation statement as on December 31, 2016.
Bank Reconciliation Statement of Atul as on December 31, 2016
Particulars | Amount ₹ (+) | Amount ₹ (-) |
---|---|---|
Balance as per cash book | 40,000 | |
Add: Cheques issued but not presented for payment: - ₹ 7,000 - ₹ 8,000 | 15,000 | |
Add: Interest credited by the bank | 325 | |
Less: Cheques deposited but not credited by the bank: - ₹ 2,000 - ₹ 5,000 - ₹ 8,000 | 15,000 | |
Less: Bank charges debited by the bank | 50 | |
Balance as per passbook | 55,325 | 55,325 |
Balance as per passbook: ₹ 55,325
On comparing the cash book with passbook of Naman it is found that on March 31, 2014, bank balance of ₹ 40,960 showed by the cash book differs from the bank balance with regard to the following:
(a) Bank charges ₹ 100 on March 31, 2017, are not entered in the cash book.
(b) On March 21, 2017, a debtor paid ₹ 2,000 into the company's bank in settlement of his account, but no entry was made in the cash book of the company in respect of this.
(c) Cheques totaling ₹ 12,980 were issued by the company and duly recorded in the cash book before March 31, 2017, but had not been presented at the bank for payment until after that date.
(d) A bill for ₹ 6,900 discounted with the bank is entered in the cash book without recording the discount charge of ₹ 800 .
(e) ₹ 3,520 is entered in the cash book as paid into bank on March $31^{\text {st }}$, 2017, but not credited by the bank until the following day.
(f) No entry has been made in the cash book to record the dishon or on March 15, 2017 of a cheque for ₹ 650 received from Bhanu. Prepare a reconciliation statement as on March 31, 201.
Here is the Bank Reconciliation Statement for Naman as on March 31, 2014:
Bank Reconciliation Statement of Naman as on March 31, 2014
Particulars | Amount ₹ (+) | Amount ₹ (-) |
---|---|---|
Balance as per Cash Book | ₹ 40,960 | |
Add: Cheques issued but not presented for payment | ₹ 12,980 | |
Amount paid by debtor directly into bank | ₹ 2,000 | |
Less: Bank charges not entered in Cash Book | ₹ 100 | |
Discount charge on bill discounted not recorded | ₹ 800 | |
Cheque deposited but not credited by bank | ₹ 3,520 | |
Cheque dishonoured not recorded in cash book | ₹ 650 | |
Balance as per Pass Book | ₹ 50,240 | ₹ 50,240 |
Explanation:
Bank charges ₹ 100: Deduct from Cash Book balance.
Amount paid directly by debtor ₹ 2,000: Add to Cash Book balance as it is not recorded.
Cheques issued but not presented for payment ₹ 12,980: Add to Cash Book balance.
Discount charge on bill ₹ 800: Deduct from Cash Book balance.
Cheque paid into bank but not credited ₹ 3,520: Deduct from Cash Book balance.
Dishonoured cheque ₹ 650: Deduct from Cash Book balance.
Final Balance as per Passbook: ₹ 50,240
Prepare bank reconciliation statement as on December 31, 2017. This day the passbook of Mr. Himanshu showed a balance of ₹ 7,000 .
(a) Cheques of ₹ 1,000 directly deposited by a customer.
(b) The bank has credited Mr. Himanshu for ₹ 700 as interest.
(c) Cheques for ₹ 3000 were issued during the month of December but of these cheques for ₹ 1,000 were not presented during the month of December.
Bank Reconciliation Statement of Mr. Himanshu as on December 31, 2017
Particulars | Amount (₹) (+) | Amount (₹) (-) |
---|---|---|
Balance as per passbook | 7,000 | |
Cheques directly deposited by a customer | 1,000 | |
Interest credited by the bank | 700 | |
Cheques issued but not presented for payment | 1,000 | |
Adjusted balance | 9,700 |
Explanation:
- Balance as per passbook shows Mr. Himanshu’s bank statement balance.
- Cheques directly deposited by a customer (₹ 1,000) increases the passbook balance but is not recorded in the cash book until the bank statement is checked.
- Interest credited by the bank (₹ 700) is also added to the passbook balance.
- Cheques issued but not presented for payment (₹ 1,000) increases as these cheques have not yet been debited from the bank account by end of December.
Total Adjusted Balance: ₹ 9,700
From the following particulars prepare a bank reconciliation statement showing the balance as per cash book on December 31, 2016.
(a) Two cheques of ₹ 2,000 and ₹ 5,000 were paid into bank in October, 2016 but were not credited by the bank in the month of December.
(b) A cheque of ₹ 800 which was received from a customer was entered in the bank column of the cash book in December 2016 but was omitted to be banked in December, 2016.
(c) Cheques for ₹ 10,000 were issued into bank in November 2016 but not credited by the bank on December 31, 2016.
(d) Interest on investment ₹ 1,000 collected by bank appeared in the passbook.
Balance as per Passbook was ₹ 50,000
Here is the bank reconciliation statement showing the balance as per the cash book on December 31, 2016:
Bank Reconciliation Statement
As on December 31, 2016
Particulars | Amount (+) ₹ | Amount (-) ₹ |
---|---|---|
Balance as per Passbook | 50,000 | |
Add: Cheques issued but not presented for payment | 10,000 | |
Add: Interest on investment collected by bank | 1,000 | |
Less: Cheques paid into bank but not credited | 7,000 | |
Less: Cheque entered in cash book but not banked | 800 | |
Balance as per Cash Book | 51,000 |
Thus, the balance as per Cash Book on December 31, 2016 is ₹ 51,000.
Balance as per passbook of Mr. Kumar is 3,000.
(a) Cheque paid into bank but not yet cleared
Ram Kumar ₹ 1,000
Kishore Kumar ₹ 500
(b) Bank Charges ₹ 300
(c) Cheque issued but not presented
Hameed ₹ 2,000
Kapoor ₹ 500
(d) Interest entered in the passbook but not entered in the cash book ₹ 100 Prepare a bank reconciliation statement.
Bank Reconciliation Statement of Mr. Kumar as on [Date]
Particulars | Amount (₹) (+) | Amount (₹) (-) |
---|---|---|
Balance as per passbook | 3,000 | |
Cheque paid into bank but not yet cleared (Ram Kumar) | 1,000 | |
Cheque paid into bank but not yet cleared (Kishore Kumar) | 500 | |
Bank Charges | 300 | |
Cheque issued but not presented (Hameed) | 2,000 | |
Cheque issued but not presented (Kapoor) | 500 | |
Interest entered in passbook but not in cash book | 100 | |
Balance as per cash book | ||
Total | 2,600 | 1,800 |
Balance as per cash book:
[ \text{Balance as per passbook} + \text{Additions} - \text{Deductions} ]
[ 3,000 + 2,600 - 1,800 = 3,800 ]
Balance as per cash book: ₹ 3,800
The passbook of Mr. Mohit current account showed a credit Balance of ₹ 20,000 on dated December 31, 2016. Prepare a Bank Reconciliation Statement with the following information.
(i) A cheque of ₹ 400 drawn on his saving account has been shown on current account.
(ii) He issued two cheques of ₹ 300 and ₹ 500 on of December 25, but only the $\mathrm{I}^{\text {st }}$ cheque was presented for payment.
(iii) One cheque issued by Mr. Mohit of ₹ 500 on December 25, but it was not presented for payment whereas it was recorded twice in the cash book.
Below is the Bank Reconciliation Statement for Mr. Mohit as on December 31, 2016, based on the given information.
Bank Reconciliation Statement of Mr. Mohit as on December 31, 2016
Particulars | Amount ₹ (+) | Amount ₹ (-) |
---|---|---|
Balance as per Passbook | 20,000 | |
Add: Cheque drawn on saving account but shown on current account | 400 | |
Add: Cheque issued but not presented (₹500 recorded twice in cash book) | 500 | |
Less: Cheque recorded twice in cash book (₹500) | 500 | |
Less: Cheque issued but not presented (₹500) | 500 | |
Adjusted balance as per Cash Book |
So, the adjusted balance as per the Cash Book is ₹ 21,000.
On Ist January 2017, Rakesh had an overdraft of ₹ 8,000 as showed by his cash book. Cheques amounting to ₹ 2,000 had been paid in by him but were not collected by the bank by January 01, 2017. He issued cheques of ₹ 800 which were not presented to the bank for payment up to that day. There was a debit in his passbook of ₹ 60 for interest and ₹ 100 for bank charges. Prepare bank reconciliation statement for comparing both the balance.
Bank Reconciliation Statement of Rakesh as on January 01, 2017
Particulars | $(+)$ Amount ₹ | $(-)$ Amount ₹ |
---|---|---|
Overdraft as per cash book | 8,000 | |
Cheques deposited but not yet collected | 2,000 | |
Bank charges | 60 | |
Interest charged | 100 | |
Cheques issued but not presented for payment | 800 | |
Balance as per passbook (overdraft) | 9,360 | |
Total | 10,160 | 10,160 |
Explanation:
Overdraft as per cash book (₹ 8,000): This is the starting point indicating the overdraft as per Rakesh’s cash book.
Cheques deposited but not yet collected (₹ 2,000): These cheques have not been processed yet by the bank, reducing the balance.
Bank charges (₹ 60) and interest (₹ 100): These are amounts debited by the bank but not yet recorded in the cash book.
Cheques issued but not presented for payment (₹ 800): These cheques have been issued but not yet processed by the bank, increasing the balance.
Prepare bank reconciliation statement.
(i) Overdraft shown as per cash book on December 31, 2017 ₹ 10,000.
(ii) Bank charges for the above period also debited in the passbook ₹ 100 .
(iii) Interest on overdraft for six months ending December 31, 2017 $₹ 380$ debited in the passbook.
(iv) Cheques issued but not incashed prior to December 31, 2017 amounted to ₹ 2,150 .
(v) Interest on Investment collected by the bank and credited in the passbook ₹ 600 .
(vi) Cheques paid into bank but not cleared before December, 31, 2017 were ₹ 1,100 .
Below is the Bank Reconciliation Statement for the provided transactions on December 31, 2017:
Bank Reconciliation Statement as on December 31, 2017
Particulars | Amount (₹) (+) |
Amount (₹) (-) |
---|---|---|
Overdraft as per cash book | 10,000 | |
Cheques issued but not presented | 2,150 | |
Interest on investment credited by the bank | 600 | |
Cheques paid into bank but not cleared | 1,100 | |
Bank charges debited in passbook | 100 | |
Interest on overdraft debited in passbook | 380 | |
Balance as per passbook (overdraft) | 11,830 |
Explanation:
- Overdraft as per cash book: ₹10,000 (Starting balance)
- Add cheques issued but not presented: ₹2,150
- Add interest on investment credited by the bank: ₹600
- Subtract cheques paid into bank but not cleared: ₹1,100
- Subtract bank charges: ₹100
- Subtract interest on overdraft: ₹380
Resulting overdraft as per passbook: ₹11,830
Kumar find that the bank balance shown by his cash book on December 31,2017 is ₹ 90,600 (Credit) but the passbook shows a difference due to the following reason:
A cheque (post dated) for ₹ 1,000 has been debited in the bank column of the cash book but not presented for payment. Also, a cheque for ₹ 8,000 drawn in favour of Manohar has not yet been presented for payment. Cheques totaling ₹ 1,500 deposited in the bank have not yet been collected and cheque for ₹ 5,000 has been dishonoured.
Based on the given information, let's prepare a Bank Reconciliation Statement for Kumar as on December 31, 2017.
Bank Reconciliation Statement of Kumar as on December 31, 2017
Particulars | Amount (₹) | (+) | Amount (₹) | (–) |
---|---|---|---|---|
Credit Balance as per Cash Book | 90,600 | |||
Add: Cheques issued but not presented for payment | ||||
- Cheque for Manohar | 8,000 | |||
Less: Cheques deposited but not yet collected | 1,500 | |||
Less: Cheques dishonoured | 5,000 | |||
Less: Post-dated cheque debited in Cash Book but not presented | 1,000 | |||
Balance as per Passbook | 91,600 |
Explanation:
Cheques issued but not presented for payment (₹ 8,000) are added back because they have reduced the cash book balance but not yet affected the bank balance.
Both cheques deposited but not yet collected (₹ 1,500) and cheque dishonoured (₹ 5,000) are subtracted because they have increased the cash book balance but not the bank balance.
The post-dated cheque (₹ 1,000) is subtracted because it was wrongly debited in the cash book before the due date.
This reconciliation results in Kumar's passbook showing a balance of ₹ 91,600.
On December 31, 2017, the cash book of Mittal Bros. Showed an overdraft of ₹ 6,920 . From the following particulars prepare a Bank Reconciliation Statement and ascertain the balance as per passbook.
(1) Debited by bank for ₹ 200 on account of Interest on overdraft and $₹ 50$ on account of charges for collecting bills.
(2) Cheques drawn but not encashed before December, 31, 2017 for ₹ 4,000 .
(3) The bank has collected interest and has credited ₹ 600 in passbook.
(4) A bill receivable for ₹ 700 previously discounted with the bank had been dishonoured and debited in the passbook.
(5) Cheques paid into bank but not collected and credited before December 31, 2017 amounted ₹ 6,000 .
Bank Reconciliation Statement of Mittal Bros. as on December 31, 2017
Particulars | (+) Amount ₹ | (-) Amount ₹ |
---|---|---|
Overdraft as per cash book | 6,920 | |
Bank charges (Interest on overdraft) | 200 | |
Bank charges (Bill collection charges) | 50 | |
Cheques drawn but not cashed | 4,000 | |
Interest credited in passbook | 600 | |
Bill receivable dishonoured | 700 | |
Cheques paid into bank but not collected | 6,000 | |
Balance as per passbook | 2640 | |
Total | 4,600 | 14,510 |
Balance as per Passbook: ₹ 2640 (overdraft)
Prepare bank reconciliation statement of Shri Bhandari as on March 31,2017
(i) The Payment of a cheque for ₹ 550 was recorded twice in the passbook.
(ii) Withdrawal column of the passbook under cast by ₹ 200
(iii) A Cheque of ₹ 200 has been debited in the bank column of the Cash Book but it was not sent to bank at all.
(iv) A Cheque of ₹ 300 debited to Bank column of the cash book was not sent to the bank.
(v) ₹ 500 in respect of dishonoured cheque were entered in the passbook but not in the cash book.
Overdraft as per passbook is ₹ 20,000 .
Bank Reconciliation Statement of Shri Bhandari as on March 31, 2017
Particulars | (+) Amount (₹) | (-) Amount (₹) |
---|---|---|
Overdraft as per passbook | 20,000 | |
Cheque recorded twice in the passbook | 550 | |
Withdrawal column of passbook under cast | 200 | |
Cheque debited in the cash book but not sent to bank (₹200) | 200 | |
Cheque debited in the cash book but not sent to bank (₹300) | 300 | |
Dishonoured cheque not entered in cash book | 500 | |
Balance as per cash book (Overdraft) | 550 | 21,200 |
Total | 550 | 21,200 |
Balance as per cash book (Overdraft) = ₹ 20,650
Overdraft shown by the passbook of Mr. Murli is ₹ 20,000 . Prepare bank reconciliation statement on dated March 31, 2017.
(i) Bank charges debited as per passbook ₹ 500 .
(ii) Cheques recorded in the cash book but not sent to the bank for collection ₹ 2,500 .
(iii) Received a payment directly from customer ₹ 4,600 .
(iv) Cheque issued but not presented for payment ₹ 6,980 .
(v) Interest credited by the bank ₹ 100 .
(vi) LIC paid by bank ₹ 2,500 .
(vii) Cheques deposited with the bank but not collected ₹ 3,500 .
Bank Reconciliation Statement of Mr. Murli as on March 31, 2017
Particulars | Amount (₹) (+) | Amount (₹) (-) |
---|---|---|
Overdraft as per passbook | 20,000 | |
Bank charges debited as per passbook | 500 | |
Cheques recorded in cash book but not sent to bank for collection | 2,500 | |
Received a payment directly from customer | 4,600 | |
Cheque issued but not presented for payment | 6,980 | |
Interest credited by the bank | 100 | |
LIC paid by bank | 2,500 | |
Cheques deposited with the bank but not collected | 3,500 | |
Balance as per cash book (overdraft) | 27,320 |
Summary:
Total credits (increases) to the passbook: ₹ 11,680
Total debits (decreases) from the passbook: ₹ 27,820
Net overdraft as per the cash book: ₹ 27,320
Raghav \& Co. have two bank accounts. Account No. I and Account No. II. From the following particulars relating to Account No. I, find out the balance on that account of March 31, 2017 according to the cash book of the firm.
(i) Cheques paid into bank prior to March 31, 2017, but not credited for $₹ 10,000$.
(ii) Transfer of funds from account No. II to account no. I recorded by the bank on March 31, 2017 but entered in the cash book after that date for ₹ 8,000 .
(iii) Cheques issued prior to March 31, 2017 but not presented until after that date for ₹ 7,429 .
(iv) Bank charges debited by bank not entered in the cash book for $₹ 200$.
(v) Interest Debited by the bank not entered in the cash book ₹ 580 .
(vi) Overdraft as per Passbook ₹ 18,990 .
To find out the balance on Account No. I of Raghav & Co. as per the cash book on March 31, 2017, we can prepare a bank reconciliation statement. Let's start with the overdraft as per the passbook and adjust with the given information.
Bank Reconciliation Statement of Raghav & Co. as on March 31, 2017
Particulars | Amount (₹) | |
---|---|---|
Overdraft as per passbook | 18,990 | |
Add: Cheques issued but not presented | 7,429 | |
Add: Transfer from Account No. II | 8,000 | |
Less: Cheques paid into bank but not credited | 10,000 | |
Less: Bank charges | 200 | |
Less: Interest debited by bank | 580 | |
Balance as per cash book | ||
34,419 | 29,770 |
Balance as per cash book of Account No. I: ₹ 4,649 (Overdraft)
In summary:
Add to overdraft: Cheques issued but not presented (₹ 7,429) and Transfer from Account No. II (₹ 8,000).
Subtract from overdraft: Cheques paid into bank but not credited (₹ 10,000), Bank charges (₹ 200), and Interest debited by bank (₹ 580).
So, the final balance as per the cash book is an overdraft of ₹ 4,649.
Prepare a bank reconciliation statement from the following particulars and show the balance as per cash book.
(i) Balance as per passbook on March 31, 2017 overdrawn ₹ 20,000 .
(ii) Interest on bank overdraft not entered in the cash book ₹ 2,000 .
(iii) ₹ 200 insurance premium paid by bank has not been entered in the cash book.
(iv) Cheques drawn in the last week of March 2017, but not cleared till date for ₹ 3,000 and ₹ 3,500 .
(v) Cheques deposited into bank on February 2017, but yet to be credited on dated March 31, 2017 ₹ 6,000 .
(vii) Wrongly debited by bank ₹ 500 .
Bank Reconciliation Statement of Mr. XYZ as on March 31, 2017
Particulars | Amount (+) ₹ | Amount (-) ₹ |
---|---|---|
Overdraft as per passbook | 20,000 | |
Interest on bank overdraft not entered in cash book | 2,000 | |
Insurance premium paid by bank not entered in cash book | 200 | |
Cheques drawn but not cleared | 6,500 | |
Cheques deposited but not yet credited | 6,000 | |
Wrongly debited by bank | 500 | |
Balance as per cash book | 2,800 | |
7,000 | 28,200 |
The balance as per cash book is ₹ 2,800 overdrawn.
The passbook of Mr. Randhir showed an overdraft of ₹ 40,950 on March 31, 2017.
Prepare bank reconciliation statement on March 31, 2017.
(i) Out of cheques amounting to ₹ 8,000 drawn by Mr. Randhir on March 27 a cheque for ₹ 3,000 was encashed on April 2017.
(ii) Credited by bank with ₹ 3,800 for interest collected by them, but the amount is not entered in the cash book.
(iii) ₹ 10,900 paid in by Mr. Randhir in cash and by cheques on March, 31 cheques amounting to ₹ 3,800 were collected on April, 07.
(iv) A Cheque of ₹ 780 credited in the passbook on March 28 being dishonoured is debited again in the passbook on April 01, 2017. There was no entry in the cash book about the dishonour of the cheque until April 15 .
Bank Reconciliation Statement of Mr. Randhir as on March 31, 2017
Particulars | Amount (₹) (+) | Amount (₹) (-) |
---|---|---|
Overdraft as per passbook | 40,950 | |
Cheques issued but not yet presented for payment | 3,000 | |
Interest collected by bank but not entered in cash book | 3,800 | |
Cheques deposited but not yet credited | 3,800 | |
Dishonoured cheque debited by bank but not entered in cash book | 780 | |
Balance as per cash book | ||
3,800 | 48,530 |
Balance as per cash book = ₹ 44,730 (Overdraft)
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Ask Chatterbot AINotes - Bank Reconciliation Statement | Class 11 Financial Accounting 1 | Accountancy
Comprehensive Guide to Bank Reconciliation Statement for Class 11 Students
Introduction to Bank Reconciliation Statement
A Bank Reconciliation Statement is a crucial document that helps in understanding and reconciling the differences between the cash book and the pass book (bank statement) of a business. For Class 11 students, mastering this concept is fundamental for accounting and understanding financial transactions more accurately.
Learning Objectives
After studying this guide, you will be able to:
Understand the meaning and importance of preparing a bank reconciliation statement.
Identify causes of differences between bank balances as per cash book and pass book.
Prepare a bank reconciliation statement.
Determine the correct bank balance as per cash book.
Causes of Differences between Cash Book and Pass Book
Timing Differences
1. Cheques issued but not presented for payment:When cheques are issued by a firm but not yet presented by the receiving party to the bank, discrepancies occur due to the time lag.
2. Cheques paid into the bank but not yet collected:Cheques deposited by a business are recorded in the cash book, but the bank credits the firm’s account when the amount is realised, causing differences.
3. Direct debits by the bank:Banks sometimes deduct amounts for services without the firm being immediately aware of them.
4. Amounts directly deposited in the bank account:Debtors might directly deposit money into the firm's account without immediate notification to the business.
5. Interest and dividends collected by the bank:Banks may collect and credit interest and dividends to the customer’s account before the customer records them.
6. Direct payments made by the bank:Banks may pay regular bills on behalf of the customer due to standing instructions, causing a difference.
7. Cheques deposited/bills discounted dishonoured:If a cheque or bill of exchange is dishonoured, discrepancies arise until the firm is notified.
Errors
1. Errors committed by the firm:Omissions or incorrect recording of transactions by the firm can lead to discrepancies.
2. Errors committed by the bank:Banks might also commit errors in recording transactions.
Steps to Prepare a Bank Reconciliation Statement
Without Adjusting Cash Book Balance
1. Start with the balance as per the cash book or pass book. 2. Deduct any cheques deposited but not yet collected. 3. Add cheques issued but not presented for payment. 4. Deduct any bank charges not recorded in the cash book. 5. Add any direct deposits and interests collected by the bank. 6. Adjust for errors to reconcile the two balances.
With Adjusting Cash Book Balance
Follow the alternative approach where both balances are adjusted before preparation. This method is less common at the introductory level.
Understanding Favourable vs. Unfavourable Balances
Favourable Balance: Indicates that deposits made are more than the withdrawals.
Unfavourable Balance (Overdraft): Indicates that withdrawals exceed deposits.
Dealing with Overdrafts
When dealing with overdrafts (negative balances), treat them as negative figures in the bank reconciliation statement.
Practical Examples and Illustrations
Example 1
Scenario:Bank balance as per cash book: ₹50,000
Cheques issued but not presented: ₹6,000
Dividends collected by the bank: ₹8,000 (not recorded in cash book)
Bank charges: ₹400 (not recorded in cash book)
Cheque deposited but not collected: ₹6,000
Bank Reconciliation Statement:
Particulars | + Amount (£) | - Amount (£) |
---|---|---|
Balance as per cash book | 50,000 | |
Cheques issued but not presented | 6,000 | |
Dividends collected by the bank | 8,000 | |
Cheque deposited but not collected by the bank | 6,000 | |
Bank charges debited by the bank | 400 | |
Balance as per pass book | 57,600 | |
64,000 | 64,000 |
Example 2
Scenario:Overdraft as per cash book: -£8,000
Cheques deposited but not yet collected: £2,000
Cheques issued but not presented: £800
Interest and bank charges: £100
Bank Reconciliation Statement:
Particulars | + Amount (£) | - Amount (£) |
---|---|---|
Overdraft as per cash book | 8,000 | |
Cheques deposited but not yet collected | 2,000 | |
Cheques issued but not presented | 800 | |
Bank charges | 100 | |
Balance as per bank pass book | 9,360 | |
10,160 | 10,160 |
Flowchart for Bank Reconciliation:
graph TD
A[Start with Cash Book Balance] --> B[Add Deposits not yet Recorded by the Bank]
B --> C[Subtract Cheques Issued but not yet Presented]
C --> D[Adjust Errors by the Business or Bank]
D --> E[Reconcile with Pass Book Balance]
Common Questions and Troubleshooting
Q: How do you identify errors in the cash book and pass book?
Review each entry and compare with the corresponding document to spot errors.
Q: What should you do if discrepancies persist?
Verify all transactions again, consult with the bank, and ensure no entries are missing or incorrectly recorded.
Importance of Regular Bank Reconciliation
Performing regular bank reconciliation ensures accuracy in financial records, identifies discrepancies early, and helps maintain financial integrity.
Conclusion
Understanding and mastering bank reconciliation statements is essential for any Class 11 student studying accounting. It not only helps in recognising discrepancies but also keeps the financial records accurate and up-to-date.
FAQs
1. What is a bank reconciliation statement?A document that compares and reconciles the bank balance as per a company's cash book with the bank statement.
2. Why is a bank reconciliation statement important?It ensures that records are accurate, helps in identifying discrepancies, and maintains financial integrity.
3. How often should businesses perform bank reconciliation?Ideally, bank reconciliation should be performed monthly, or more frequently, depending on the volume of transactions.
This guide provides a comprehensive understanding of the bank reconciliation statement, crucial for Class 11 students in accounting. Start practising and mastering this fundamental concept to enhance your accounting skills.
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