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Preparation of Bank Reconciliation Statement with Adjusted Cash Book


When we check out with the items that normally cause the difference between the passbook balance and the cash book balance, we find a number of items, which appear only in the passbook. Why not first record such items in the cash book to work out the adjusted balance (also known as amended balance) of the cash book and then prepare the bank reconciliation statement. This shall reduce the number of items responsible for the difference and show the exact figure of balance at bank in the balance sheet.

In fact, this is the procedure in practice. Only those items that cause the difference on account of the time gap in recording appear in bank reconciliation statement.

They are:
  1. Cheques issued but not yet presented,
  2. Cheques deposited but not yet collected, and
  3. Due to an error in the passbook.
The step wise preparation of bank reconciliation statement is shown below:
The following activity show you the step wise preparation of a bank reconciliation statement

 

A Small Project — an Activity of Preparation of Bank Reconciliation Statement

 

Illustration 4:
Kamlesh works as a cashier for Aqua Products Co. His responsibilities include maintenance of the firm's. The firm's cash book for July 2005 which Kamlesh has just finished entering and balancing for the month is shown in exhibit 1. Help Kamlesh to prepare the bank reconciliation statement.

Note: the cash column is omitted). A copy of firm's bank statement dated July 31, 2005 is also illustrated in exhibit 2. The numerical difference between the two is Rs. 261.30. (Bank statement Rs. 903.00 - Cash book Rs. 641.70).

Solution
Aqua Products - Cash Book

Date

Particulars

Bank

Rs.

Date

particulars

Bank

Rs.

2005

July 01

July 03

July 15

July 31

 

 

 

 

 

 

 



July 31

 


Balance b/d

Kanishk Enterprises

Rampaul and sons

Sarin Bros

 

 

 

 

 

 



Balance b/d

 


756.20 *

220.00*

330.00*

63.00

 

 

 

 

 


________

1,369.20

________

641.70

2005

July 02

July 02

July 02

July 08

July 14

July 14

July 15

July 26

July 31


Aditya 004450

Verma & Co

004451

Gytri & Co 004452

Mehta Ltd. 004453

Subash & Co.

Kaushik 004454

Kriosk Ltd. 004455

Insurance Premimum(SO)


 

Balance c/d

 

50.00*

130.00

10.00*

27.50

89.00*

49.00*

250.00*

122.00*

641.70



________

1,369.20

________

 

Exhibit-1

Bank Statement

Account                                      Aqual Products Co.

Account Number                        79014456

Ledger No.                                 17

Date                                           July 31, 2005

Date

Details

Debit

Rs.

Credit

Rs.

Balance

Rs.

2005

July 01

July 04

July 09

July 14

July 16

July 19

July 24

July 26

July 30

July 31

July 31

Balance

Cheques

004450

004452

Subash & Co (DD)

Cheques

004455

Insurance premium

004454

Bank Charges

Ruchita Ltd.

 

 

 

50.00*

10.00*

89.00*


250.00*

122.00*

49.00*

12.95

 

 

 

220.00*

 

 

330.00*

 

 

 

 


179.75

756.20 Cr.


976.20 Cr.

926.20 Cr.

916.20 Cr.

827.20 Cr.

1,157.20 Cr.

 

907.20 Cr.

785.20 Cr.

736.20 Cr.

723.25 Cr.

903.00 Cr.

Exhibit 2
Solution
Step 1: Tick off the items in both cash book and bank statement (as shown in Exhibit 2).
Step 2: Updating the cash book from the bank statement.

The unticked items on the bank statement indicate items that have not yet been entered in Aqua Products Co.'s cash book. These are:
  1. Receipt on July 31 by Ruchita Limited amounting to Rs. 179.75
  2. Bank charges debited by bank on July 31 amounting to Rs. 12.95
These items needs to be entered in the cash book to up date it (refer exhibit 3 -The new entries are shown in darker type).
Aqua Products Cash Book (Extract)

Date

Particulars

Bank

Rs.

date

particulars

Bank

Rs.

2005

July 31

July 31

 

 

 

 

Aug 01

 

Balance b/d

Ruchita Limited

 

 

 

 

Balance b/d

 

641.70

179.75

_____

 

821.45

_____

808.50

2005

July 31

July 31

 

Bank Charges

Balance c/d

 

12.95

808.50

_____

 

821.45

______

 

Exhibit 3

 

Step 3: Balance the cash book bank columns to produce an updated balance. As shown in exhibit 3, the balance of the bank column stands at Rs. 808.50. But then a difference is Rs. 94.50 (i.e. Rs. 903.00 - 808.50) still exists.

Step 4 : Identify the remaining unticked items from the cash book.

These are Rs.
  1. Receipts on July 31 from Sarin Bros 63.00
  2. Payments made on July 02 to Verma & Co. 130.00 (Cheque No. 004457)
  3. Payments made on July 08 to Mehta Ltd. 27.50 (Cheque No. 004453)
These above three items will appear in next month's bank statement as these are due to time gap. These are the items which will appear in the bank reconciliation statement.
 
Aqua Products Co.
Bank Reconciliation Statement as on July 31, 2005
 

Particulars

Amount

Rs.

Amount

Rs.

 

 

Add:

 

 

 

Less:


Balance at Bank as per cash Book

Unprecedented Cheques

Verma & Co

Mehta & Co
 

Outstanding lodgement

Balance at bank as per bank statement

 

 


130.00

27.50

 

 

 

 

 

808.50

 

157.50
 

________

966.00

63.00

  ________

903.00

  ________


Key Terms Introduced in the Chapter
  1. Bank Reconciliation Statement
  2. Cash book and Passbook




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