Omission or wrong recording of transactions relating to cheques deposited and wrong totaling etc, committed by the bank while posting entries in the passbook also cause differences between passbook and cashbook balance.
When a bank gives a firm the facility of withdrawing in excess of its deposits, this excess withdrawal is called overdraft. The bank charges interest on this overdraft and debits the firm’s account from such interest time to time.
Bank reconciliation statement is a statement prepared mainly to reconcile the difference between the ‘Bank Balance’ shown by the Cash Book and Bank Pass Book.
Bank Reconciliation Statement |
|||
As on March 31, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Pass Book |
|
40,950 |
(a) |
Cheque issued but not presented for payment |
|
3,000 |
(b) |
Interest collected by bank not credited |
3,800 |
|
(c) |
Cheque paid but not presented for payment |
|
3,800 |
(d) |
A cheque deposited in bank being dishonoured |
780 |
|
|
Overdraft as per Cash Book |
43,170 |
|
|
|
47,750 |
47,750 |
Bank Reconciliation Statement |
|||
As on 31st December, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Cash Book |
|
90,600 |
(a) |
A cheque posted in debit column of cash bank column has not been collected |
|
1,000 |
(b) |
Cheque issued to Manohar not presented for payment |
8,000 |
|
(c) |
Cheque deposit in bank for collection but not collected |
|
1,500 |
(d) |
Cheque dishonoured |
|
5,000 |
|
Overdraft as per Pass Book |
90,100 |
|
|
|
98,100 |
98,100 |
Bank Reconciliation Statement |
|||
As on 1st January, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Cash Book |
|
8,000 |
(a) |
Cheque sent to the bank for collection but not collected |
|
2,000 |
(b) |
Cheque issued but not presented for payment |
800 |
|
(c) |
Bank charges charged by Bank |
|
100 |
(d) |
Interest charged by bank |
|
60 |
|
Overdraft as per pass book |
9,360 |
|
|
|
10,160 |
10,160 |
Bank Reconciliation Statement |
|||
As on 31st December, 2016 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Pass Book |
20,000 |
|
(a) |
A cheque drawn on saving account wrongly shown in current account |
400 |
|
(b) |
Cheque issued but not presented for payment |
|
500 |
(c) |
Cheque issued but not presented for payment and wrongly entered twice in cash book ( ₹500 x 2) |
|
1,000 |
|
Balance as per Pass Book |
|
18,900 |
|
|
20,400 |
20,400 |
Bank Reconciliation Statement |
|||
As on ………… |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Pass Book |
3,000 |
|
(a) |
Cheque sent to the Bank but not cleared Ram Kumar 1000 Kishore Kumar 500 |
1,500 |
|
(b) |
Bank charges |
300 |
|
(c) |
Cheque issued but not presented for payment Hameed 2000 Kapoor 500 |
|
2,500 |
(d) |
Interest credited by bank |
|
100 |
|
Balance as per Cash Book |
|
2,200 |
|
|
4,800 |
4,800 |
Bank Reconciliation Statement |
|||
As on 31st December 2016 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Pass book |
50,000 |
|
(a) |
Cheque sent to bank but not credited ₹(2000+5000) |
7,000 |
|
(b) |
Cheque entered in cash book but not sent to bank |
800 |
|
(c) |
Cheque issued but not presented for payment |
|
10,000 |
(d) |
Interest on investment collected by the bank |
|
1,000 |
|
Balance as per Cash Book |
|
46,800 |
|
|
57,800 |
57,800 |
Bank Reconciliation Statement |
|||
As on 31st December 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Pass Book |
7,000 |
|
(a) |
Cheque directly deposit by a customer |
|
1,000 |
(b) |
Bank interest credited by bank |
|
700 |
(c) |
Cheque issued but not presented for payment |
|
1,000 |
|
Balance as per Cash Book |
|
4,300 |
|
|
7,000 |
7,000 |
Bank Reconciliation Statement |
|||
As on March 31, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹(-) |
(a) |
Balance as per Cash Book |
3,200 |
|
(b) |
Cheque issued but not presented for payment |
1,800 |
|
(c) |
Cheque deposited but not cleared |
|
2,000 |
(d) |
Bank charges debited by bank |
|
150 |
|
Balance as per Pass Book |
|
2,850 |
|
|
5,000 |
5,000 |
Bank Reconciliation Statement if started with debit, i.e.., favourable balance as per cash book, each entry causing difference is analysed to ascertain its effect on cash book balance, i.e., whether it has held to increase or decrease in the Cash Book balance.
Entries that have led to decreased Cash Book balance such as: (Cheque issued but not presented for payment, Interest credited by the bank but not recorded in the cash book, Direct deposit into the bank not recorded in the cash book) are added to the balance as per cash book.
Similarly, entries of differences that have led to increased cash book balance such as (cheques deposited but not credited by bank, bank charges debited by the bank) are deducted from the balance as per Cash Book.
Differences caused by Time Gap in recording transactions:
Bank Reconciliation Statement |
|||
As on 31st March, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Pass Book |
|
20,000 |
(a) |
Interest on bank overdraft |
2,000 |
|
(b) |
Insurance premium paid by bank |
200 |
|
(c) |
Cheque issued but not presented for payment (₹3,000 +₹3,500) |
|
6,500 |
(d) |
Cheque sent to the bank for collection but not collected |
6,000 |
|
(e) |
Amount wrongly debited by bank |
500 |
|
|
Overdraft as per Cash Book |
17,800 |
|
|
|
26,500 |
26,500 |
Bank Reconciliation Statement |
|||
As on 31st March, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Pass Book |
|
18,990 |
(a) |
Cheque paid into bank prior to Mar 31, 2017 |
10,000 |
|
(b) |
Cheque transferred from A/c No II to A/c No I |
|
8,000 |
(c) |
Cheque issued but not presented for payment |
|
7,429 |
(d) |
Bank charges debited by bank |
200 |
|
(e) |
Interest debited by bank not entered in Cash Book |
580 |
|
|
Overdraft as per Cash Book |
23,639 |
|
|
|
34,419 |
34,419 |
Bank Reconciliation Statement |
|||
As on 31st March, 2017 |
|||
S.N. |
Particulars |
|
|
|
Overdraft as per Pass Book |
|
20,000 |
(a) |
Payment of cheque twice debited in the pass book |
550 |
|
(b) |
Withdrawal column of the pass book undercast |
|
200 |
(c) |
Cheque debited in the cash book but not deposited in the bank |
200 |
|
(d) |
Cheque added in the cash book but not deposited in the bank |
300 |
|
(e) |
Cheque dishonoured |
500 |
|
|
Overdraft as per Cash Book |
18,650 |
|
|
|
20,200 |
20,200 |
Bank Reconciliation Statement |
|||
As on 31st December, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Cash Book |
|
6,920 |
(a) |
Interest and collection charges (₹200 + ₹50) |
|
250 |
(b) |
Cheque issued but not presented for payment |
4,000 |
|
(c) |
Interest collected by bank has not credited in cash book |
600 |
|
(d) |
Bill discounted with bank dishonoured |
|
700 |
(e) |
Cheque sent to the bank for collection but not collected and credited by the bank |
|
6,000 |
|
Overdraft as per Pass Book |
9,270 |
|
|
|
13,870 |
13,870 |
Bank Reconciliation Statement |
|||
As on 31st December, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Cash Book |
|
10,000 |
(a) |
Bank charges debited in pass book |
|
100 |
(b) |
Interest on overdraft for six months |
|
380 |
(c) |
Cheque issued but not presented for payment |
2,150 |
|
(d) |
Interest on investment credited by bank |
600 |
|
(e) |
Cheque paid into bank for collection but not collected |
|
1,100 |
(f) |
Overdraft as per Pass Book |
8,830 |
|
|
|
11,580 |
11,580 |
Bank Reconciliation Statement |
|||
as on March 31, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Cash Book |
40,960 |
|
(a) |
Bank charged not entered in cash book |
|
100 |
(b) |
Cash deposit by debtor in bank account |
2,000 |
|
(c) |
Cheque issued but not presented for payment |
12,980 |
|
(d) |
Discount charges recorded in bank |
|
800 |
(e) |
Cash deposit in bank but not credited |
|
3,520 |
(f) |
Cheque of Bhanu dishonoured |
|
650 |
|
Balance as per Pass Book |
|
50,870 |
|
|
55,940 |
55,940 |
Bank Reconciliation Statement |
|||
As on 31 December, 2016 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Cash Book |
40,000 |
|
(a) |
Cheque sent to the bank for collection but not credited (₹2,000 + ₹5,000 + ₹8,000) |
|
15,000 |
(b) |
Cheque issued but not presented (₹7,000 + ₹8,000) |
15,000 |
|
(c) |
Interest credited by bank |
325 |
|
(d) |
Bank charges debited |
|
50 |
|
Balance as per Pass Book |
|
40,275 |
|
|
55,325 |
55,325 |
Bank Reconciliation Statement |
|||
As on …………… |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Cash Book |
7,800 |
|
(a) |
Cheque deposited in Bank but not credited |
|
3,000 |
(b) |
Cheque issued but not presented for payment |
1,500 |
|
(c) |
Insurance premium paid by bank directly |
|
2,000 |
(d) |
Bank interest credited by the bank |
400 |
|
(e) |
Bank Charges |
|
100 |
(f) |
Amount directly deposited by customer |
4,000 |
|
|
Balance as per Pass Book |
|
8,600 |
|
|
13,700 |
13,700 |
Bank Reconciliation Statement |
|||
As on March 31, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Balance as per Cash Book |
3,700 |
|
(a) |
Cheques issued but not presented for payment (₹700 + ₹300 + ₹180) |
1,180 |
|
(b) |
Cheque sent to the bank for collection but not credited |
|
1,200 |
|
Balance as per Pass Book |
|
3,680 |
|
|
4,880 |
4,880 |
While preparing bank reconciliation statement, under amended cash balance approach, the balance as per cash book or as per pass book is the starting item. The debit balance as per the cash book means the balance of deposits held at the bank.
Such a balance will be a credit balance as per the pass book. It is also called the favourable balance as per cash book or favourable balance as per pass book. Such a balance exists when the deposits made by the firm are more than its withdrawals.
On the other hand, the credit balance as per the cash book indicates bank overdraft. In other words, the excess amount withdrawal over the amount deposited in the bank. It is also known as unfavorable balance as per cash book or unfavorable balance as per pass book.
The following steps will be followed in preparation of the bank reconciliation statement:
Reconciliation of the cash book and the bank pass book balances amounts to an explanation of differences between them. The difference between the cash book and the bank passbook is caused by:
Timing Differences:
When a business compares the balance of its cash book with the balance shown by the bank passbook, there is often a difference, which is caused by the time gap in recording the transaction relating either to payments or receipts.
The factors affecting time gap includes:
Differences caused by errors:
Sometimes the difference between the two balances may be accounted for by an error on the part of the bank or an error in the cash book of the business. This cause difference between the bank balance shown by the cash book and the balance shown by the bank statement.
Errors committed in recording transaction by the firm: Omission or wrong recording of transactions relating to cheques issued, cheques deposited and wrong totaling, etc. committed by the firm while recording entries in the cash book cause difference between cash book and passbook balance.
Errors committed in recording transactions by the bank: Omission or wrong recoding of transaction relating to cheques deposited and wrong totaling etc. committed by the bank while posting entries in the passbook also cause difference between passbook and cashbook balance.
Bank Reconciliation Statement is a statement prepared to reconcile the bank balance as per Cash Book with the balance as per Bank Statement or Bank Pass Book.
Need and Importance of Bank Reconciliation Statement:
Bank Reconciliation Statement is prepared starting with the corrected Cash Book Balance taking the following steps:
Step 1: Draw up Cash Bank column only. If favourable balance (Dr. Balance) as per the cash book is given, write the balance on the debit side of the cash book. If unfavourable balance or overdraft as per the cash book is given, write the balance on the credit side of the cash book.
Step 2: Pass entries in the Cash Book in respect of the following items:
Amount recorded in the Pass book but not recorded in the Cash Book that should have been recorded.
Rectifying entries in respect of errors committed in the Cash Book.
At this point, balance as per adjusted cash book is known.
Step 3:
Adjusted balance of the cash book is taken as starting point, Bank Reconciliation Statement is prepared listing the entries causing difference and arriving at the balance as per bank statement or bank pass book.
Bank Reconciliation Statement |
|||
As on 31st March, 2017 |
|||
S.N. |
Particulars |
₹ (+) |
₹ (-) |
|
Overdraft as per Pass Book |
|
20,000 |
(a) |
Bank charges debited as per pass book |
500 |
|
(b) |
Cheque entered but could not sent to the bank for collection |
2,500 |
|
(c) |
Payment received directly by customer |
|
4,600 |
(d) |
Cheque issued but not presented for payment |
|
6,980 |
(e) |
Interest credited by the bank |
|
100 |
(f) |
LIC paid by bank |
2,500 |
|
(g) |
Cheque deposited with bank but not collected by bank |
3,500 |
|
|
Overdraft as per cash book |
22,680 |
|
|
|
31,680 |
31,680 |
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