Bank Reconciliation Statement (Chapter – 11)

Meaning and Importance Of Bank Reconciliation Statement

A statement that is prepared to reconcile the balances shown by the cash book and the pass book is Bank Reconciliation Statement. It is prepared by finding the causes of difference between the two balances.
IMPORTANCE OF BANK RECONCILIATION STATEMENT
1. It ensures the accuracy of the balances shown by the pass book and the cash book.
2. It helps to check the accuracy of the entries made in cash book and pass book.
3. It helps to detect and rectify any errors committed in both the books.
4. It helps to update the cash book by discovering some entries not yet recorded.
5. It indicates any undue delay in the collection and clearance of cheques.

Reasons for Disagreement between cash book & pass book

• Cheques issued but not presented for payment.
• Cheques paid or deposited but not collected and credited by the bank.
• Interest credited by the bank but not recorded in cash book.
• Bank charges, interest on overdraft etc. debited by the bank but not recorded in cash book.
• Expenses paid by the bank as per the instruction of customer.
• Dividend collected by the bank.
• Amount directly deposited into the bank by customers but not recorded in cash book.
• Cheque sent into bank for collection was dishonored.
• Recording the false amount in the debit/credit side of the pass book.

Determination of Adjusted Balance

It is a summary of banking transactions that compares and reconciles the balance of pass book with the balance of cash book of the company. It helps to determine the actual bank balance for financial reporting purpose. The following two parts are taken into consideration while determining the adjusted trial balance.

• Determination of adjusted balance as per pass book or bank statement.
• Determination of adjusted balance as per cash book.

Numerical Questions

WHEN CASH BOOK BALANCE IS GIVEN

Example – 1

The following information is given to you.
a) Bank balance as per cash book Rs.16,000.
b) Cheque issued of Rs. 4,500 had not been presented for payment.
c) Interest provided by the bank of Rs. 250 but not entered in the cash book.
d) Bank charge debited by the bank of Rs. 110 but was omitted to record in cash book.
e) Cheque of Rs. 6,500 was sent into bank for collection but not collected yet.
f) Life Insurance Premium Paid by the bank as per the prior instruction of its client of Rs. 500
Required: Bank reconciliation statement

BANK RECONCILIATION STATEMENT

PARTICULARS	AMOUNT	AMOUNT
Balance as per Cash Book		16,000
Add:
b. Cheque issued but not presented for payment.	4,500
c. Interest provided by the bank.	250	4,750
Less:
d. Bank charges charged by the bank.	110
e. Cheque sent into bank for collection but not collected yet.	6,500
f. Life Insurance premium paid by the bank	500	(7,110)
Balance as per Pass Book		13,640

Example-2

The following particulars are given to you.
a) Bank balance (Debit balance) as per cash book Rs. 9,130.
b) Two cheques of Rs. 3,500 and Rs. 3,800 were issued but not presented for payment.
c) A cheque of Rs 2,900 paid into bank for collection but not collected by the bank.
d) Bank charges debited by the bank but not yet entered in the cash book Rs. 700.
e) Interest collected by the bank but not entered in cash book of Rs.625.
f) Cheque received and debited in the cash book of Rs. 2,000, but not recorded in the pass book.
Required: Bank Reconciliation Statement

BANK RECONCILIATION STATEMENT

Particulars	Amount	Amount
Balance as per cash book		9,130
Add:
b. Cheque issued but not presented for payment.	7,300
e. Interest collected by the bank.	625	7,925
Less:
c. Cheque paid into bank but not collected	2,900
d. Bank charges charged by the bank	700
f. Cheque received and debited in cash book.	2,000	(5,600)
Balance as per Pass Book		11,455

Example – 3

On 31st January, 2020, Mr. Sunil found the differences in the balances between cash book and pass book. The following facts were found:
a) Cheques of Rs. 5,600 were issued, but the cheque of Rs. 2,600 only was presented for payment.
b) A cheque of Rs. 240 deposited but not yet collected.
c) Cheques worth Rs. 7,000 deposited into bank but a cheque of Rs. 5,200 only were credited in pass book.
d) Rs. 2,400 were collected by the bank for interest on investments.
e) Electricity bill paid by the bank Rs. 2,000.
f) Bank balance as per cash book Rs. 25,500.
Required: Bank reconciliation statement

BANK RECONCILIATION STATEMENT

PARTICULARS	AMOUNT	AMOUNT
Balance as per Cash Book		25,500
Add:
a. Cheque issued but not full amount presented in the bank.	3,000
d. Interest collected by the bank.	2,400	5,400
Less:
b. Cheque deposited but not collected.	240
c. Cheque deposited but only partial amount credited in pass book.	1,800
e. Electricity bill paid by the bank.	2,000	(4,040)
Balance as per Pass Book		26,860