accounts. Causes of difference : – timing of recoding the transaction. – error made by business or by the bank. Correct cash balance: It may happens that some of the receipts or payments are missing from either of the books and errors, if any, need to be rectified.
This arise the need to look at the entries/errors recorded in both statements and other information available and compute the correct cash balance before reconciling the statements. Questions for Practice Short Answers State the need for the preparation of bank reconciliation statement? What is a bank overdraft? Briefly explain the statement ‘wrongly debited by the bank’ with the help of an example.
State the causes of difference occurred due to time lag. Briefly explain the term ‘favourable balance as per cash book’ . Enumerate the steps to ascertain the correct cash book balance. Long Answers What is a bank reconciliation statement.
Why is it prepared? 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. Explain the process of preparing bank reconciliation statement with amended cash balance. Numerical Questions Favourable balance of cash book and passbook – From the following particulars, prepare a, bank reconciliation statement as at March , .
(i) Balance as per cash book Rs. , (ii) Cheque issued but not presented for payment Rs. , (iii) Cheque deposited but not collected upto March , Rs. (iv) Bank charges debited by bank Rs.
( Ans : Balance as per passbook Rs. , ) On March the cash book showed a balance of Rs. , as cash at bank, but the bank passbook made up to same date showed that cheques for Rs. , Rs.
and Rs. respectively had not presented for payment, Also, cheque amounting to Rs. , deposited into the account had not been credited. Prepare a bank reconciliation statement.
( Ans : Balance as per passbook Rs. , ). The cash book shows a bank balance of Rs. , .
On comparing the cash book