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BANK RECONCILIATION STATEMENT

When a person or any business concern opens and operates a current or savings
account with any commercial bank, he or the business concern (customer of a bank) is
supplied periodically with a statement showing the cash balnce in the form of PASS
BOOK or BANK STATEMENT. The customer can refer to the balance of an account
after each transaction.

In case of a business organization, the accountant prepares his set of books of


account for the transactions entered in to by the business. The transactions, the business
has with the Bank shall be maintained by him in a Book called as “CASH BOOK” which
contains separate columns for Cash and Bank transactions.

The student should remember the fact that there is every chance for a difference in
the balance maintained by these two sets of books(namely PASS BOOK and CASH
BOOK) due to the time lag between the point of time the entries are made in one set of
books when compared to the other set of books.

The Accountant should compare both the sets of books and should prepare a Bank
reconciliation statement periodically in order to sort out the differences. If he is not in a
position to sort it out himself, he should bring it to the notice of the Banker in order to set
right the difference.

The Differences can arise due to various reasons; some such instances are listed
hereunder:
• Cheques issued but not presented for payment (Entries would have been
passed in the Cash book but the Banker has no knowledge about the cheques
as they have not yet been presented before him for payment)
• Cheques deposited but not yet realized by the Bank (As soon as a cheque is
deposited, an entry will be made in the Cashbook but the Banker may pass an
entry in the Pass book , on realization of cheque only. For a local cheque,
officially the Banker can take one day for realization and for out station
cheques up to a maximum of 15 days. The banker shall pass an entry in the
pass book only on realization of the cheque and in the meantime the balances
shown in both the books naturally differ)
• Bank charges entered in the Pass book only (The Accountant of the
businessman does not have any knowledge about the same)
• Total errors in the Cash book
• Total errors in the Pass book
• Cheque entered in the Cash book but the cheque is not yet deposited in the
bank
• Wrong posting in the Cash book (debited instead of credited and vice versa)
• Wrong posting in the Pass book (debited instead of credited and vice versa)
• Collection made by the Banker directly on instructions from the Customer
• Standing instructions executed by the Banker
• Local cheques paid into bank but not entered in cash book
• Interest entry made by the Banker (and the Accountant of the customer has no
information about the same)
• A cheque sent for collection and returned unpaid had not been entered in the
Cash Book
• Some party paying directly into the account
• Cheque discounted with the Banker has been dishonoured and the same is
entered in the Pass book only.

Most of the important transactions mentioned above can be grouped in the form of a
table given below:
ORDINARY(FAVOURABLE )BALANCE UNFAVOURABLE(OVERDRAFT)BALANCE
CASH BOOK TO PASS BOOK TO CASH BOOK TO PASS BOOK TO
Particulars PASS BOOK CASH BOOK PASS BOOK CASH BOOK
Cheques deposited Minus(-) Plus(+) Plus (+) Minus(-)
Cheques Issued Plus (+) Minus(-) Minus(-) Plus(+)
Debit if any made Minus(-) Plus(+) Plus (+) Minus(-)
by banker
Credit if any made Plus (+) Minus(-) Minus(-) Plus(+)
by banker

Illustration 1 (p.280)
On 31st March 2009 the Pass book of Mr.V.Shanmugam showed a credit balance of
Rs.9250. A comparison of pass book and cash book revealed the following:
1. Cheques deposited but not yet cleared by 31st March2009 is Rs.1500/-
2. Cheques issued by shanmugam but not presented by bank for payment
before 31st March 2009 is Rs.2000/-
3. Insurance premium paid by the bank on behalf of shanmugam but not
recorded in the cash book is Rs.240/-
4. Bank commission not yet recorded in the cash book is Rs.10/-
5. Interest on bonds collected by the bank on behalf of shanmugam not yet
recorded in the cash book is Rs.500/-
(Bank balance as per cash book – Rs.8500/-)

1 From the following particulars ascertain the Bank Balance as per pass book of
Ms.Pavithra as on December 31,2008.
a) The balance as per cash book on that date was Rs.11,500
b) Cheques issued but not cashed before that date amounted to Rs.1, 750
c) Cheques paid into bank, but not cleared before December 31, 2008 amounted
to Rs.2150
d) Interest on investments collected by the bank not entered in the cash book
amounted to Rs.275
e) Local cheques paid into bank but not entered in cash book Rs.300
f) Bank charges debited in the pass book Rs.25

2 From the following particulars extracted from the book of Mr. Sai, prepare
a Bank reconciliation statement showing the balance as per pass book as on 31st
January 1992.
a) The bank balance as per cash book was Rs.7000 on 31.1.1992
b) Cheques amounting to Rs. 800 were issued in January 1992 but presented
for payment in February 1992.
c) Cheques amounting to Rs.1800 were paid in the bank in January 1992 but
were credited in the bank in February 2000.
d) A cheque of Rs. 600, which was received from a customer, was entered in
the bank column of the cash book in January 1992 but the same was
paid into the bank in February 1992.
e) The Pass book shows a credit of Rs.250 for interest and a debit of Rs.50/- for
Bank charges.

3 From the following particulars of Mr. Sathya ascertain the Bank Balance as per
pass book in December 31,2008.
a) The Bank Balance as per cash book was Rs. 11500 on December 31,2008
b) Cheques issued but not cashed before 31.12.94 amounted to Rs. 1750/-.
c) Cheques paid in to Bank but not cleared before December 31, 2008
amounted to Rs. 2150/-.
d) Interest on Investments collected by the Bank but not entered in the cash
book amounted to Rs.275.
e) Local cheque paid in but not entered in the cash book Rs. 250.
f) Bank charges debited in the pass book Rs. 95.

4 The pass book of Mr.Narayan showed a balance of Rs. 15500 on December


31, 2000.Cheques issued by him before that date but were not presented for
payment amounted to Rs. 3200. Cheques amounting to Rs.1800 were paid
into Bank on December 30, but were not credited until January 2, 2001. On
31st December a cheque for Rs. 540 was received and entered in the Bank
column of the cash book but was omitted to be paid into the bank. Prepare a
Bank Reconciliation Statement as on 31st, December 2000.

5 On 31st December 2008 your pass book showed a Credit balance of


Rs.10020. Before that date you had issued a cheque amounting to Rs.4000 but
they were not presented for payment. A cheque for Rs.1000 paid by you in to
the bank was not credited before 31 st December, 2008. You had also
received a cheque for Rs.2000 which, though entered by you in your cash
book was omitted to be paid to the bank. Besides, to your credit there was an
entry of Rs.150 for interest.

7 From the following particulars ascertain the balance that would appear in the
pass book of Mr. Imanuel as on 31 st December 1990.
a) The Cash Book showed a Credit Balance of Rs. 18500.
b) Out of the cheques worth Rs. 30000 issued prior to this date, it was found that
the bank had paid only cheques worth Rs. 14500
c) There was also a credit in the pass book for an amount paid by our customer
directly to the bank Rs. 11610.
d) Cheques paid in before 31.12.1990 amounted to Rs. 23000 but the bank had
collected and credited cheques worth Rs. 9000 only.
e) Interest on Investments collected by bank and credited in the pass book
amounts to Rs. 95.
f) There was an entry on the debit side in the pass book for bank charge Rs. 25.

8 On 31st December 2008, the cash book of Mr. Baghwan Prasad shows that his
account with the bank indicates an overdraft balance of Rs. 1200. On checking
his cash book with the Bank pass book he finds that cheques issued amounting
to Rs. 212 have not been passed through the bank and also that the bank has not
credited him with a sum of Rs.108 being a Cheque paid in on 31st December 2008.
On the same date the pass book shows that the bank had debited him with
interest and charges Rs. 24, which was not passed through his cash book.
Draw a Bank Reconciliation statement showing the overdraft as per pass Book.

9 On 31st December 2007 the cash book of Ms.Thirumala Balaji showed an


overdraft of Rs. 5670. From the following particulars make out a Bank
Reconciliation statement and find out the balance as per Bank pass book.
(a) Cheques drawn but not cashed before 31st December 2007 amounted
to Rs. 3946.
(b) Cheques paid into the bank but not cleared before 31st December 1988
amounted to Rs.4891.
(c ) A cheque for Rs.520 previously discounted with bank had been
dishonoured and debited in the pass Book
(d) Debit is also made in the pass Book for Rs.120 on account of interest on
overdraft and Rs.55 on account of charges for collecting bills and cheques.
(e) Bank has collected interest on investment and credited Rs. 760 in the Pass
Book.

10 From the following particulars, prepare a Bank Reconciliation statement for


Mr.Sai Samarpan as on 31.3.2007.
1. Overdraft as per pass book on March 31, 1989 was Rs. 12900.
2. Cheques issued before that date but presented for payment after that date
amounted to Rs.1200.
3. Cheques paid in to the bank but not cleared and credited before 31.3.2007.
amounted to Rs.3200.
4. Interest on overdraft amounting to Rs. 175 debited in the pass book but not
entered in to the cash book.
5. Interest on investments amounting to Rs. 700 was collected by the bank
and credited in the pass book but not entered in the cash book.
6. Bank charges Rs. 22 not entered in to the cash book.

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