February 26, 2019

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BANK RECONCILIATION STATEMENT Class Notes

ACCOUNTING FOR INCOMPLETE RECORDS



Bank Reconciliation Statement

BANK RECONCILIATION STATEMENT

 “Bank Reconciliation Statement is the statement which reconciles the bank balance as per the cash book with the balance as per the bank pass book, by showing all causes of differences between the two.

  • Causes of disagreement between the balances of cash book and pass book.
  1. Timing difference on recording of transactions.
  2. Error in Cash Book.
  3. Error in Pass Book.

 

  • Difference between Trade Discount and Cash Discount.
Basis Bank Statement Bank Reconciliation Statement
Who prepares It is prepared by bank. It is prepared by bank customers.
Object To inform customers about all transactions. It is prepared to reconcile the bank balance as per cash book.
Final Result Trade discount account is not opened. Cash discount account is opened.
Necessity Allowed on purchases. Allowed on immediate payment.

 

  • Format of Bank Reconciliation Statement when the Bank Balance as per Cash Book is taken as a starting point.



 

Particulars Plus Items

(`)

Minus Items

(`)

A.      Bank Balance as per Cash Book (Favorable i.e Debit Balance)

Overdraft as per Cash Book (Unfavorable i.e Credit Balance)

 

B.      Add:Transactions having the effect of higher balance in Pass Book

·         Cheque deposited in to the bank but not recorded in Cash Book

·         Cheque issued but not yet presented for payment

·         Interest allowed in Pass Book only

·         Bill Receivable directly collected by bank

·         Direct payment by a customers in to bank but not recorded in Cash Book

·         Cheques issued returned on technical grounds

·         A wrong credit given by bank in Pass Book

 

C.      Less: Transactions having the effect of lower balance in Pass Book

·         Cheque received and recorded in the Bank Column but not yet sent to bank for collection

·         Cheque deposited but not yet collected by bank

·         Bank charges, Interest on overdraft debited in Pass Book only

·         Insurance Premium paid directly by bank under standing advice

·         Cheque deposited for collection, returned dishonored and recorded in Pass Book only

·         Discounted Bills Dishonored but not recorded in Cash Book

·         A wrong debit given by bank in Pass Book

 

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  • Format of Bank Reconciliation Statement when the Bank Balance as per Pass Book is taken as a starting point.

 

Particulars Plus Items

(`)

Minus Items

(`)

D.     Bank Balance as per Pass Book (Favorable i.e Credit Balance)

Overdraft as per Pass Book (Unfavorable i.e Debit  Balance)

 

E.       Add: Transactions having the effect of lower balance in Pass Book

·         Cheque received and recorded in the Bank Column but not yet sent to bank for collection

·         Cheque deposited but not yet collected by bank

·         Bank charges, Interest on overdraft debited in Pass Book only

·         Insurance Premium paid directly by bank under standing advice

·         Cheque deposited for collection, returned dishonored and recorded in Pass Book only

·         Discounted Bills Dishonored but not recorded in Cash Book

·         A wrong debit given by bank in Pass Book

 

F.       Less: Transactions having the effect of higher balance in Pass Book

·         Cheque deposited in to the bank but not recorded in Cash Book

·         Cheque issued but not yet presented for payment

·         Interest allowed in Pass Book only

·         Bill Receivable directly collected by bank

·         Direct payment by a customers in to bank but not recorded in Cash Book

·         Cheques issued returned on technical grounds

·         A wrong credit given by bank in Pass Book

 

XXX

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

XXX

XXX

XXX

XXX

XXX

 

XXX

XXX

 

 

XXX

 

 

XXX

 

XXX

XXX

XXX

XXX

 

XXX

XXX

 

 

 

 

 

 

 

 

 

 

 

 

XXX XXX

 

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