Under modern approach, a bank reconciliation statement is divided into two sections.
The first section starts with the balance as per the bank statement (pass book) and ends with the adjusted bank statement.
The second section begins with the balance as per the cash book and ends with the adjusted cash balance.
Both adjusted balance must be equal to establish the reality of the two records.
For first section (pass book or bank statement), no need to prepare Journal entries.
Because bank balance will be correct automatically when not presented cheques are presented for payment and uncleared cheques are cleared.
Second sections (cash book) are to be journalised.
Transactions recorded in pass book but not adjusted in cash book are journalized.
ABC Company
Bank Reconciliation Statement
For the month of ……
Particulars |
Amount |
Amount |
||
Balance as per bank statement |
|
xxxx |
||
Add: |
Deposit in transit: |
|
|
|
|
Cash recorded in depositor’s book but not in bank statement |
|
|
|
Less: |
Outstanding cheques (checks):
|
Cheque 1 Cheque 2 |
|
|
Add: |
Errors (more amount error recorded in bank statement) |
|
|
|
Less: |
Errors (lower amount error recorded in bank statement) |
|
|
|
|
Adjusted bank statement |
|
xxxx |
|
|
|
|
|
|
Balance as per depositor’s book (DB) |
|
xxxx |
||
Add: |
Cheques, cash directly deposited by customer Notes receivables collected by bank but not recorded in DB Income (interest, dividend etc) credited in bank statement but not in DB |
|
|
|
Less: |
Dishonoured cheques (NFS) Expenses and charges debited in bank statement but not in DB |
|
|
|
Add: |
Errors (more amount error recorded in cash book) |
|
|
|
Less: |
Errors (lower error amount recorded in cash book) |
|
|
|
|
Adjusted cash balances |
|
xxxx |
|
NSF cheques = Non-Sufficient Funds cheques. It is similar to bounced or dishonoured cheque
PROBLEM: 8
The bank statement for KP Traders on 30th June 2020 indicates a balance of $91,000. The cash book records indicate $48,250 balance for the month of June:
Comparing the bank statement with cash book, the following reconciliations have been identified:
a. The bank has collected $10,300 for bills receivable; the face value of the bill was $10,000.
b. Bank credited interest on deposit $100.
c. A deposit of $18,500 representing receipts for June does not figure in the bank statement
d. Cheques issued but not presented for payment amounted to $30,000 and $22,000
e. A cheque drawn for $1,300 had been incorrectly charged by the bank as $3,100.
f. A cheque for $300 was recorded in the cash book as $2,400. The cheque was for the payment of purchase of office stationery on account.
g. Deposited check of $1,200 by the traders has been back as NSF.
h. Bank service charges for the month of June was $250.
Required: Prepare the bank reconciliation statement at the end of July.
[Answer: Adjusted cash balance = $59,300]
SOLUTION:
KP Traders
Bank Reconciliation Statement
For the month of March
|
Amount $ |
Amount $ |
|||
Balance as per bank statement June end 2020 |
|
91,000 |
|||
Add: |
Deposit in transit |
|
18,500 |
||
|
Cash recorded in depositor’s book but not in bank statement |
|
|
||
Less: |
Outstanding cheques (checks): |
$30,000 + $22,000 |
|
|
(52,000) |
Add: |
Errors (error in charging 3,100 instead of 1,300) |
|
1,800 |
||
|
Adjusted bank statement |
|
$59,300 |
||
|
|
|
|
||
Balance as per depositor’s book (DB) |
|
48,250 |
|||
Add: |
Cheques/cash directly deposited by customers Bill receivables collected by bank but not recorded in DB Interest revenue on bill credited in bank statement Interest credited by bank on deposit money |
– 10,000 300 100 |
10,400 |
||
Less: |
Dishonoured cheques (NFS Check) Service charge debited by bank in bank statement but not in DB |
1,200 250 |
(1,450) |
||
Add: |
Errors (cash book error recorded as 2,400 instead of Rs 300) |
|
2,100 |
||
|
Adjusted cash balance |
|
$59,300 |
||
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ACCOUNTING EQUATION http://tiny.cc/c89jkz
BASIC JOURNAL ENTRIES IN NEPALI http://tiny.cc/uaakkz
BASIC JOURNAL ENTRIES http://tiny.cc/8aakkz
JOURNAL ENTRY AND LEDGER http://tiny.cc/caakkz
LEDGER http://tiny.cc/haakkz
SUBSIDIARY BOOK http://tiny.cc/399jkz
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TRIAL BALANCE & ADJUSTED TRIAL BALANCE http://tiny.cc/c59jkz
BANK RECONCILIATION STATEMENT (BRS) http://tiny.cc/q59jkz
DEPRECIATION http://tiny.cc/ugakkz
FINAL ACCOUNT: CLASS 11 http://tiny.cc/y89jkz
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PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
AP: 6
ABC Traders has following extracted data:
Bank statement an ending balance of $185,000 on 31 May 2020, whereas the company’s ledger shows an ending balance of $140,500.
Statement has debit a $100 service charge by the bank.
Bank interest credited in statement $20.
Firm has issued cheque of $50,000 but not yet cleared by the bank.
Firm deposited $15,000 but this did not appear on the bank statement.
A cheque amounting $250 issued to the office supplier was misreported in the cash payments journal as $150.
A bill receivable of $9,800 was collected by the bank.
Deposited cheque of $520 by the traders has been back as NSF.
Required: Bank reconciliation statement
[Answer: Adjusted cash balance = $150,000]
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