(i) Explain the reasons on account of which the balance as shown by the pass book does not agree with the balance as shown by the bank column of the cash book.
(ii) The bank pass book of Mr X showed an overdraft of Rs 33575 on 31st March , 2012 . On going through the pass book, the accountant found the following:
(a) A cheque of Rs 1080 credited in the pass book on March 28, being dishonoured is debited again in the pass book on 1st April, 2012. There was no entry in the cash book about the dishonour of the cheque until 15th April.
(b) Bankers had credited his account with RS 2800 for interest collected by them on his behalf, but the same had not been entered in his Cash book.
(c) Out of Rs 20500 paid in by Mr. X in cash and by cheques on 31st March, cheques amounting to Rs 7500 were collected on 7th April.
(d) Out of cheques amounting to Rs 7800 drawn by him on 27 th March, a cheque for Rs 2500 was encashed on 3rd April.
Prepare bank reconciliation statement on March 31, 2012.
The answer given in the book is : Overdraft balance as per cash book= Rs 31375
Reasons of Differences between Bank Balance of Cash Book and Pass Book Balance:
A) Recording Transactions at different point of time:Whenever Cheque is received from Debtors or any other person it is recorded immediately on the debit side of the Cash Book (that is, Cash Book Balance stands increased). On the Other hand Bank will increase the Customer Account only at the time when it receives money from the other party. Similar to this when Cheque is issued to Supplier it is recorded immediately, but the Bank will record this at the time of making payment for that Cheque. This recording of transaction at different point of time causes difference between Cash Book and the Pass Book Balance.
B) Certain transactions recorded by Bank: There are certain transaction such as bank interest or bank charges or direct deposits by parties in Customer Account which are recorded in the bank without Customer’s knowledge. Customer gets to know about them when he Updates his passbook with the bank or recives his bank statement . This also causes difference between balance of Cash Book and the Bank Pass Book.
C) Clerical Mistakes: There may be clerical mistakes by the bank at the time of recording transactions in the Customer’s Account. Also, such mistakes can be committed by the Customer at the time of preparing their Cash Book. Examples of these mistakes are recording wrong amount or carry forwarding wrong balance.
Bank Reconciliation Statement
as on March 31, 2012
Overdraft as per Pass Book (Given Book)
Add: Cheques deposited but not yet collected
Less: Interest received but not yet entered in Cash book
Cheque withdrawn but not encashed
Overdraft as per Cash Book
Note: Cheque of Rs 1,080 credited in the pass book on March 28, being dishonoured is debited again in the pass book on April, 2012 will not affect the BRS as on March 31, 2012. Therefore, it is not considered.