Note on Bank Reconcillation 2

  • Note
  • Things to remember

FORMAT OF BANK RECONCILIATION STATEMENT

Information

Cash book shows debit balance that is bank statement shows credit balance

Cash book shows credit balance that is bank statement shows debit balance

CB to BS

BS to CB

CB to BS

BS to CB

Cheques issued but not presented in the bank.

Add

Less

Less

Add

Cheques paid into bank but not collected and credited by the bank.

Less

Add

Add

Less

Credit, if any in the bank statement.

Add

Less

Less

Add

Debit, if any in the bank statement

Less

Add

Add

Less

General Points:

1. Cheques issued but not presented for payment

Account holder makes payment to its creditors and other outstanding parties through cheques is known as cheques issued or cheque drawn. If third parties are unavailable to present the same cheques, its effect is only shown through cash book but not shown onpass book.

2. Cheques sent for collection but not credited by bank

If account holder has received payment in form of cheques from its customer, the same cheques are to be sent for collection and deposited into account holder's bank account but sometimes bank could not collect the amount for account holders and at that time effect of deposit only has been shown through cash book. Thus, it should be shown through Bank Reconciliation Statement.

3. Bank Charges debited by bank

Whenever banking transaction took place, sometimes bankers may charge some of the amount for their services and should deduct the customers account and sent notice to the account holders. In absence of such information, account holder could not record the transaction and charges were shown through only pass book. Thus, it should be shown through Bank Reconciliation Statement.

4. Bank Interest Credited by bank

Bankers should provide some of interest to their customer against their deposit at certain interval. Afterwards the information conveyed to account holders and in the absence of information, account holder could not record such amount of interest. Thus, it should be shown through Bank Reconciliation Statement.

5. Interest on Overdraft charged by bank

If the customer has been provided overdraft facilities banker may charge some of the interest on overdraft and information to be conveyed to account holders, but sometime, in absence of information account holder could not record the same transaction through his Cash book. Thus, such pointsshould be shown through Bank Reconciliation Statement.

6. Dividend collected by bank

Bankers may collect amount of dividend on behalf of account holders and credited his account. Such amount should be recorded into cash book in accordance of banker advice and if advice has not been received by the account holder cash book balance should be lower than the balance as per pass book and such points to be shown through Bank Reconciliation Statement.

7. Amount paid by bank as per standing instruction

Nowadays, bankers have provided to pay different outstanding bill through bank on behalf of account holder and for the same they have to receive standing instruction from account holder. If certain payment has been made by banker and advice has been delayed, the same pointsshould be shown through Bank Reconciliation Statement.

8. Under cast in Payment Side of Cash Book

By mistake, if sometimes total of payment side falls below than actual, it increases the bank balance as per cash book.

9. Under cast in Receipt side of Cash Book

By mistake, if sometimes total of Receipt side falls below than actual it decreases the bank balance as per cash book.

10. Cheques dishonoured by bank

Due to different reason, if customer's cheques deposited into bank and same was dishonoured, it will cause to decrease the bank balance. Since, the first information carried by bank, thus pass book balance should be decreased.

11. Amount of rebate not recorded through Cash Book against the bills

If certain bills of account holder discharged at certain rebate by bank before maturity, bank balance should be increased with amount of Rebate.

S.N.

Particulars

Pass Book

Cash Book

1

Cheques issued but not presented for Payment

-

2

Cheques sent for collection but not credited by bank

+

3

Bank Charges debited by bank

-

4

Bank Interest credited by bank

+

5

Interest on Overdraft charged by bank

-

6

Dividend collected by bank

+

7

Dividend collected by bank

-

8

Payment side of cash book Undercast

+

9

Receipt side of Cash book Undercast

-

10

Cheque dishonoured by bank

-

Specimen of Bank Reconciliation statement

Taking cash book balance as base;

Bank Reconciliation Statement

Particualrs

Amount

Amount

Bank balance as per cash book

Add i

ii

iii

Less i

Ii

Balance as per pass book

Xxx

Xxx

Xxx

Xxxxxxxx

xxxxxxxx

Xxx

Xxx

xxxxxxx

xxxxxxxx

Similarly

Taking pass book balance as base

Bank Reconciliation Statement

Particulars

Amount

Amount

Bank balance as per Pass book

Add i

ii

iii

Less i

ii

Xxx

Xxx

Xxx

Xxxxxxx

xxxxxxx

Xxx

Xxx

xxxxxxx

xxxxxxx

Overdraft

Meaning of Overdraft

The amount by which a check exceeds the funds on deposit to cover it, is called overdraft.

  1. Balance of a bank account in which funds withdrawn have exceeded funds deposited.
  2. An extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it. Basically the bank allows people to borrow a set amount of money.

Simply, Overdraft represent the amount that have account holder has withdrawn from his bank account in excess of deposit made by him. Such facilities should be provided by the bank to good customer that have selected by the banker to improve customer relations.

Summary of Adjustment

S.N

Causes of Differences

Balance as per

Overdraft as per

1

cheque issued but not yet presented for payment.

+

-

-

+

2

Cheques deposited into the bank but not recorded in cash book.

+

-

-

+

3

Interest allowed in pass book only.

+

-

-

+

4

Bills receivable directly collected by bank.

+

-

-

+

5

Cheques issued but returned on technical grounds.

+

-

-

+

6

A wrong credit given by bank in pass book.

+

-

-

+

7

Direct payment by a customer into the bank but not recorded in cash book.

-

+

+

-

8

Cheques received & recorded in bank column but not yet sent to bank for collection

-

+

+

-

9

Cheques deposited but not yet collected by the bank

-

+

+

-

10

Expenses paid directly by bank under standing advice

-

+

+

-

11

Cheques deposited for collection , returned dishonoured & recorded in pass book only

-

+

+

-

12

A wrong debit given by bank in pass book .

Discounted bill dishonoured but not recorded in cash book

Cheque issued but not recorded in cash book

Cheque paid into bank but not recorded in cash book

+

-

-

+

(Joginder Goet, Bhesh Raj Banjade, 2012)

Bibliography

Joginder Goet, Bhesh Raj Banjade. (2012). Pricals of Accounting. Kalimati, Kathmandu: Dreamland Publication.

  • Cheques issued but not Presented Tor Payment.

Account holder makes payment to its creditors and other outstanding parties through cheques is known as cheques issued or cheque drawn.If third parties unavailable to present the same cheques its effect is only shown through cash book thus to shown through Bank Reconciliation statement.

  • Cheques sent for collection but not credited by bank ;

If account holder has received payment in form of cheques from its customer, the same cheques to be sent for collection and deposited into account holders bank account but sometimes bank could not collect the amount for account holders and that time effect of deposit only has been shown through cash book thus to be shown through Bank reconciliation Statement.

  • Bank Charges debited by bank :

Whenever banking transaction took place, sometimes bankers may charge some of the amount for their services and should deduct the customers account and sent notice to the account holders. In absence of such information account holder could not record the transaction and charges were shown through only pass book thus it should be shown through Bank reconciliation Statement.

  • Bank Interest Credited by bank

Bankers should provide some of Interest to their customer against their Deposit at certain Interval. Afterwards the information conveyed to account holders. And in the absence of information account holder could not record in such amount of Interest, thus it should be shown through Bank Reconciliation Statement.

.

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