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Bank reconcillation statement- as per cash book

armchairca (Day trader/ Entrepreneur / IPCC student) (146 Points)

26 May 2010

Prepre Bank reconcilliation statement

Balance as per Cash book = Rs. 25,450

1.- Debit balance was shown short in Cash Book by. Rs.300 (anwer - on plus side)

2.- Cheque paid to S ltd for Rs. 700 had bee entered in cash book as 7000 (anwer - 7000-700=6300 on plus side)

3.- Cash paid in bank for 100 had been entered in cash book as 90 (answer - on 100-90=10 on plu side)

4.-Cheque paid into bank had been incorrectly totalled. The total was 170 instead it had been entered in cash book as 150. ( answer - 170-150=20 on minus side)

Now,

I already know it is added and subtracted but couldn't undertand the logic behind their entries in Reconcilliation statement.

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2 Replies

Lakshmi (Student) (1836 Points)
Replied 26 May 2010

If u r starting from the cash book reduce all the item which make the balance of the cash book high from pass book.

For example : Cheque deposited but not cleared

We will record the transaction as we deposit the cheque. But the bank will make entry only after the clearance. So here the cash book is more than pass book & wanted to tally with pass book so reduce the amount from the cash balance.

If u r starting from the cash book add all the item which make the balance of the cash book low from pass book.

For example :Cheque issued but not presented

We will record the transaction as we give the cheque. But the bank will make entry only after the isue by the party . So here the cash book is less than pass book & wanted to tally with pass book so add the amount to the cash balance.

If u r starting from the pass book add all items which make the pass book balance lower than the cash book balance. & reduce those items from pass book which make the pass book balance high than the cash book balance.

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armchairca (Day trader/ Entrepreneur / IPCC student) (146 Points)
Replied 29 May 2010

The logic is purely arithmetic and never accounting: appraoch the question in that way always.

Balance as per Cash book = Rs. 25,450

1.- Debit balance was shown short in Cash Book by. Rs.300 (answer - on plus side) reason because no error has been made in passbook and it was never under consideration for bankers as it was cashiers mistake, in BRS terms it mean undercasting of Dr. side of bank account in the cash book since there is no record in PB and Cash book is short we will add Rs.300 to bring it to the equal of PB.

2.- Cheque paid (issued) to S ltd for Rs. 700 had been entered in cash book as 7000 (answer - 7000-700=6300 on plus side) because it is wrong credit in the cash book). Since PB is deducted with 700 but CB is deducted with 7000 there appears to be a gap of about extra 6300 which has been deducted. we will bring the cash book equal to the level of PB. PB reflects 700 therefore we too deduct 700 from CB and the extra 6300 is added back so that effect of transaction is equal.

3.- Cash paid (deposited) in bank for 100 had been entered in cash book as 90 (answer - on 100-90=10 on plus side) because effect on passbook is increase we therfore add 10 i.e the difference to bring CB equal to PB.

4.-Cheque paid (deposited) into bank had been incorrectly totalled. The total was 170 instead it had been entered in cash book as 150. ( answer - 170-150=20 on minus side) CB is 170 and PB is 150 since PB is reflecting 150 we will bring the cash book amount to equal PB so in effect we subtract Cash book by 20.

Thanx Lakshmi for chiiping in, your help is apprciated.