Bank reconciliation statement
In modern times, bank transactions are increased and cash transactions are decreased due to increase in volume of business, safety, and compliance of law.
Bank is a financial institute established as per RBI norms doing following functions.
Discount promissory notes, B/E etc
Allows the facility of Bank overdraft
Collects dividend and interest on securities.
Provides loan for various purpose.
Provides security and guarantee to customers
Provides letter of credit and travel cheque.
Makes the payment of various expenses, and purchase or sale of various securities.
Bank pass book is a copy of customer account in the books of bank.
| Date | particular | Withdrawal
Dr. |
Deposit
Cr. |
Balance
Dr/Cr |
Bank provides a statement or pass book to its customer periodically.
Debit balance as per passbook means over withdraw hence bank over draft
Credit balance as per pass book means excess deposit hence bank balance.
Cash book :
Bank column of cash book will be reverse of pass book or vice versa.
It is similar to ledger like bank account.
Cash book (bank column)
| Date | particulars | Rs | Date | particulars | Rs |
Increase in bank balance, cheque received or due to deposit, it is debited.
Decrease in bank balance, cheque issued, withdrawal it is credited
Bank reconciliation statement
It is not a part of double entry system,
It is prepared by customer for finding causes of differences in cash book and pass book balance.
Causes of difference:
Timing :
Cash book records transactions when cheque is received, deposited or issued, but passbook records when cheque is cleared.
Transactions :
Interest and charges are recorded latter in cash book when it is informed by bank.
Errors :
It may arise during recording of transactions in cash book or passbook.
E .g. wrong balance carried forward, wrong amount, wrong side, wrong account, under casting, over casting etc.
Methods for preparation of bank reconciliation :
1 Debit / credit 2 add /less
Under both methods, answer will be same.
1 debit / credit :
Step 1 balance always debit and overdraft is credit, whether given as per pass book or cash book
2 Pass journal entries in the books of customer only
Issue cheque :
Party account debit
To bank a/c
Deposit :
Bank a/c dr.
To party a/c
Bank charges/bank interest expenses
Bank charges/ bank interest exp. Dr.
To bank
Bank interest income
Bank a/c dr.
To bank interest
When question is silent only interest word is used, it is not specified whether it is income or expense, if opening is balance then interest is income, if opening is overdraft then interest is expenses.
Directly deposited cheque by customer in bank:
Bank account dr.
To party
Cash book debit side over casting
Bank
To suspense
Cash book debit side under casting
not debited bank column
Cash book credit side over casting
Party account Dr.
To bank account
Cash book credit side under casting
Not credited in bank column.
Wrongly debit balance c/f to credit bal.
Party
To bank
(double amount)
Wrong credit balance c/f to debit
Bank
To party account
(double amount)
Pass book withdrawal over cast:
Party
To bank
Pass book withdrawal under cast
Bank
To party
Pass book deposit over cast:
Bank account dr
To party
Pass book deposit under cast
Party
To bank
debit balance of pass book c/f to credit
bank
to party
(double)
Credit balance of pass book c/f to debit
Party
To bank
(double)
Step 3 if effect is given in starting book reverse the above entry
If effect is not given in starting books give the direct effect of above entry.
Step 4 if debit excess it is balance and credit excess it is over draft.
Step 5 if question is started with cash book answer will be as per pass book and vice versa
Add/less :
First solve the question with above method.
If question is started with debit, all debit items will be added and credit items will be deducted. And vice versa.
Q.1 Balance as per cash book 10000
Deposited but not cleared 6000
Issued but not cleared 4000
Bank charges not recorded 100
Bank interest 50
Directly deposited cheque 3000
Pass balance as per cash book.
Ans : Dr. cr.
Balance as per cash book 10000
Deposited but not cleared 6000
Issued but not cleared 4000
Bank charges not recorded 100
Bank interest 50
Directly deposited cheque 3000
Balance as per passbook 10,950
Total 17,050 17,050
Q.2 if in above question given balance as per pass book find balance as per cash book
Ans : Dr. cr.
Balance as per pass book 10000
Deposited but not cleared 6000
Issued but not cleared 4000
Bank charges not recorded 100
Bank interest 50
Directly deposited cheque 3000
Balance as per cash book 9050
Total 16100 16100
Q.3 If in above question overdraft as per cash book is given find as per passbook
Overdraft as per cash book 10000
Deposited but not cleared 6000
Issued but not cleared 4000
Bank charges not recorded 100
Bank interest 50
Directly deposited cheque 3000
Balance as per passbook
Total 9,050 16,100
q.4 If in above question overdraft as per pass book is given find as per cashbook
overdraft as per pass book 10000
Deposited but not cleared 6000
Issued but not cleared 4000
Bank charges not recorded 100
Bank interest 50
Directly deposited cheque 3000
Balance as per cash book 10950
Total 17050 17050
Question 5
Balance as per cash book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500
Directly deposited cheque 7000
Debit of cash book c/f to credit 600
Withdrawal wrongly recorded 3000
In pass book
find balance as per passbook.
. Bank reconciliation statment
Dr. cr.
Balance as per cash book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500
Directly deposited cheque 7000
Debit c/f as credit in CB 1200
Wrongly withdraw recorded 3000
Balance as per passbook 56690
Total 61700 61700
Question 6
Over draft as per cash book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500 Directly deposited cheque 7000
Debit of cash book c/f to credit 600
Withdrawal wrongly recorded 3000
In pass book
find OD as per passbook.
Ans 6 Bank reconciliation statment
Dr. cr.
Over draft as per CB 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500 Directly deposited cheque 7000
Debit c/f as credit in CB 1200
Wrongly withdraw recorded 3000
Over draft as per passbook44310
Total 55510 55510
Question 7
Balance as per pass book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500 Directly deposited cheque 7000
Debit of cash book c/f to credit 600
Withdrawal wrongly recorded 3000
In pass book
find balance as per cash book
Ans. Bank reconciliation statment
Dr. cr.
Balance as per pass book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500
Directly deposited cheque 7000
Debit c/f as credit in CB 1200
Wrongly withdraw recorded 3000
Balance as per cash book 43310
Total 55010 55010
Question 8
Over draft as per pass book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500 Directly deposited cheque 7000
Debit of cash book c/f to credit 600
Withdrawal wrongly recorded 3000
In pass book
find balance as per passbook.
Ans 8
Bank reconciliation statment
Dr. cr.
overdraft as per pass book 50000
Deposited but not cleared 2000
Issued but not cleared 3000
Bank charges not recorded 10
Bank interest 500
Directly deposited cheque 7000
Debit c/f as credit in CB 1200
Wrongly withdraw recorded 3000
OD as per cash book 56690
Total 61700 61700