taken out of the bank by the business, customer’s account is debited as this decreases the amount owed by the bank to the customer. As a result of this, favourable balance, as per bank statement (bank pass book), will appear as a credit balance and overdrawn balance as a debit balance. . .
Bank overdraft It is not possible to have unfavourable cash balance in the cash book. But, it is possible to have unfavourable balance in the bank account. When the business is not having sufficient money in its bank account, it can borrow money from the bank. As a result of this, amount is overdrawn from bank.
Record Debit balance Credit balance Bank statement Overdraft (negative balance) Favourable balance (positive balance) Cash book Favourable balance (positive balance) Overdraft (negative balance) Accountancy - . . Differences between bank column of cash book and bank statement Following are the differences between bank column of cash book and bank statement: S.No. Bank column of cash book Bank statement It is prepared by business concern.
It is prepared by bank (banker). Cash deposits are entered on the debit side. Cash deposits are entered in the credit column. Cash withdrawals are entered on the credit side.
Cash withdrawals are entered in the debit column. Cheque deposits are debited on the day of deposit. Cheque deposits are credited only at the time of realisation of cheque. Cheques issued are credited on the day of issue of cheque.
Cheques issued by customers are debited by bank on the date on which the payment is made. Collections and payments as per standing instructions of the business are entered only after checking with the bank statement. Collections and payments as per standing instructions of the business are entered in the banker’s book on the date of realisation or payment. It is balanced at the end of a specific period.
It is balanced after each transaction. . Bank Reconciliation Statement If every entry in the cash book matches with the bank statement, then bank balance will be