Pls explai in details the following transactions while preparing Bank Reconiliation statement starting with cash Book balance.
1.Cheque of Rs.3,500 drawn in Karthika"s Savings A/c has been shown as drawn on her Current account....what is its meaning.2
2.A cheque of Rs.800 shown in Cash Book as deposited into Bank, but was wrongly kept inside the Cash Box... what is its meaning.
how these treated while preparing BRS staring Cash Book bALANCE
Hi Retheeshp,
1. Cheque of Rs 3,500 drawn in Karthika's Savings A/c has been shown as drawn on her Current Account
As you know, according to the business entity concept, owner is different from the business. So, when a cheque of Rs 3,500 drawn (issued) from personal account of the owner is shown as drawn from the business account, it will have the following impact:
a. Cash Book balance (Receipts - Payments) will reduce
b. Pass Book balance will remain unaffected (as the cheque was actually issued from the personal bank account of Karthika)
That means, Pass Book Balance > Cash Book Balance
Hence, when starting balance is as per Cash Book, this amount of Rs 3,500 will be added in order to reconcile the balances of both the books.
2. A cheque of Rs 800 shown in Cash Book as deposited into bank was wrongly kept inside the Cash Box
We are humans. Right? and we tend to make mistakes, forget things, etc etc. So, there can be a possibility, that when a cheque is received, we showed it on the receipts side of the Cash Book but forgot to actually deposit the cheque with the bank. In such a case:
a. Cash Book balance will increase
b. Pass Book balance will remain unaffected (as the cheque was never deposited with the bank)
That means, Pass Book balance < Cash Book balance
Hence, when starting balance is as per Cash Book, this amount of Rs 800 will be subtracted in order to reconcile the balances of both the books.
Hope this clarifies your doubt!!
1. Cheque of Rs 3,500 drawn in Karthika's Savings A/c has been shown as drawn on her Current Account
As you know, according to the business entity concept, owner is different from the business. So, when a cheque of Rs 3,500 drawn (issued) from personal account of the owner is shown as drawn from the business account, it will have the following impact:
a. Cash Book balance (Receipts - Payments) will reduce
b. Pass Book balance will remain unaffected (as the cheque was actually issued from the personal bank account of Karthika)
That means, Pass Book Balance > Cash Book Balance
Hence, when starting balance is as per Cash Book, this amount of Rs 3,500 will be added in order to reconcile the balances of both the books.
2. A cheque of Rs 800 shown in Cash Book as deposited into bank was wrongly kept inside the Cash Box
We are humans. Right? and we tend to make mistakes, forget things, etc etc. So, there can be a possibility, that when a cheque is received, we showed it on the receipts side of the Cash Book but forgot to actually deposit the cheque with the bank. In such a case:
a. Cash Book balance will increase
b. Pass Book balance will remain unaffected (as the cheque was never deposited with the bank)
That means, Pass Book balance < Cash Book balance
Hence, when starting balance is as per Cash Book, this amount of Rs 800 will be subtracted in order to reconcile the balances of both the books.
Hope this clarifies your doubt!!