Andhra Pradesh BIEAP AP Inter 1st Year Accountancy Study Material 9th Lesson Bank Reconciliation Statement Textbook Questions and Answers.
AP Inter 1st Year Accountancy Study Material 9th Lesson Bank Reconciliation Statement
Short Answer Questions
What is meant by Bank Reconciliation Statement? (May ’17 – T.S.)
Bank Reconciliation Statement is a statement prepared to reconcile the difference between the balances as per the bank column of the cash book and the pass book on any given date.
What do you mean by Favourable Balance ? (Mar. ’17 – T.S.)
It means cash book shows debit balance at the same time pass book shows credit balance. Favourable balance means our money is in the Bank Account. Hence cash book debit balance and pass book credit balance is called favourable balance.
What do you mean by Unfavourable Balance ?
Sometimes a businessman withdraws/excess amount from the bank account and the closing bank balance of a month is a debit balance. This balance amount is called unfavourable balance or overdraft balance.
Describe the Overdraft. (Mar. 2019, ’18 – T.S.; Mar ’15 – A.P.)
When withdrawals exceed deposits, cash book bank column shows credit balance and the pass book shows debit balance. It is called unfavourable or overdraft balance. Sometimes business¬man is allowed by the bank to withdraw the amount, in excess of what he has in his bank account after moving prior agreement with banker. This facility is called overdraft.
Cheques deposited with a bank for collection, what is the impact on Cash Book?
When the cheques are deposited with a bank for collection, that the cheques amount was debited in the cash book, before sending them for collection. Hence the impact on cash book is the cash balance increased.
Essay Type Questions
Explain the nature and importance of the Bank Reconciliation Statement.
A statement prepared to reconcile the balance of cash book and pass book is called the ‘Bank Reconciliation Statement’.
Generally the business concerns would like to maintain an account with a bank and prepare a Bank Reconciliation Statement.
- Locating the mistakes or errors either side of both cash book and pass book.
- Preventing any fraud and misappropriations.
- Enabling the business concern to get up-to-date record of transactions from the bank.
- Ensuring a proper evidence of payment.
- Help to know exact cash balance at bank.
Enumerate the reasons for differences between the balance shown in the Cash Book and Pass Book.
I. Items entered in the bank columns of the Cash Book, but not entered in Pass Book or bank statement.
- Cheques sent for collection, but not collected by the bank. This will appear only on the debit side of the cash book.
- Cheques issued but not yet presented for payment. This appears only on credit side of the cash book.
II. Items entered in the bank statement or bank Pass Book, but not in Cash Book:
- Direct payment into the bank by a customer. This appears only on the credit side of the bank statement.
- Bank charges : Charges paid by the business for using some of the bank services. This will appear on the debit side of the pass book.
- When the business instructs the bank to make regular payments of fixed amounts, rent, insurance premium, etc. These will appear on the debit side of the bank statement.
- Interest on overdrafts or loans appears on the debit side of the bank statement.
- Interest on deposits appears on the credit side of the bank statement.
- Dishonour of cheques and bills – first appears on the debit side of the bank statement. But the firm records the same when it receives the information from the bank. As a result, the balance as per cash book and that of pass book will differ.
III. Difference caused by Errors:
- Errors committed in recording transactions by the firm in cash book : Omission of transaction, wrong recording, wrong totaling, over / under casting, etc.
- Errors committed in recording transactions by the bank : Sometimes bank may also commit errors. E.g. Omission or wrong recording of transaction, wrong totaling, over/ under casting, etc.
Explain the procedure of preparing the Bank Reconciliation Statement by taking imaginary items and figures.
Bank reconciliation statement is prepared to reconcile the two balances of Cash Book and Pass Book. The preparation of Bank Reconciliation Statement starts with banking adjustments to one balance to reach the other balance, which ensures agreement between both the balances.
The BRS is prepared usually at the end of the period, i.e. a month, a quarter, half a year or a year whichever is convenient to the firm. When both the books, cash book and pass book are given in problem, then see whether the two books are related to the same period or different periods. If the books are for different periods, then common items should be considered and if it is for same period, then items not appearing in both the books should be taken into consideration.
The way how to prepare BRS may be illustrated as follows.
Bank Reconciliation Statement of …… as on …….
Pass Book of a trader shows a balance of Rs. 12,600. On comparing the Pass Book with the cash Book, the following discrepancies were noted. (Mar. 2018 – A.P.)
a) Cheques deposited in bank but not collected Rs. 2,100
b) Cheques issued but not presented for payment Rs. 1,800
c) Bank Charges Rs. 175
d) Bank paid insurance premium Rs. 1,500
e) The Debtor paid directly into bank account Rs. 1200
Bank Reconciliation Statement
Murthy and Son’s Pass Book showed a balance of Rs. 21,700 as on 30th September, 2013. On comparing the Cash Book the following discrepancies were noted.
a) Cheques issued but not yet presented for payment Rs. 2,500
b) Directly deposited by a customer Rs. 3,000
c) Interest credited by bank is found in Pass Book only Rs. 575
d) Cheques deposited in bank but not credited Rs. 3,500
e) Bank Charges Rs. 150
Prepare a Bank Reconciliation Statement showing balance as per Cash Book.
Bank Reconciliation Statement of Murthy and Son as on 30th September 2013
Giri Ind Ltd’s bank balance as per Pass Book is Rs. $,900. There is disagreement between Cash Book and Pass Book balances as, on 31.3.2014. Prepare Bank Reconciliation statement by considering following transactions.
a) Cheque issued but not yet presented for payment Rs. 2100
b) Cheque deposited for collection, but not yet realized Rs. 900
c) A wrong debit given by bank in Pass Book Rs. 500
d) Bank charges debited only in Pass Book Rs. 210
e) Direct payment of insurance premium as per standing instructions Rs. 600
Bank Reconciliation Statement of Giri lnd Ltd’s as on 31.03.2014
On comparing the bank Pass Book of BBR Ltd., with its Cash Book (bank column), the following differences were noticed. Prepare BRS with the help of Cash Book Balance Rs. 15,000.
a) Cheque sent for collection, notyet realized Rs. 5,600
b) Cheques issued but not yet presented for payment Rs. 4,200
c) The receipts side of Cash Book has been overcast by Rs. 300
d) A cheque drawn on firm’s current a/c, wrongly debited in its savings a/c, Rs. 2,100
e) A cheque ofRs. 900 deposited into bank, bit forgot to enter in Cash Book
Bank Reconciliation Statement of BBR Ltd
Reddy’s Cash Book shows a favourable balance ofRs. 25,500 as on 31st December, 2013. On comparing the same with his Pass Book following differences were noticed. Calculate bank balance as per Pass Book.
a) A cheque for Rs. 2,450 received from Saritha & Co was entered twice in the Cash Book.
b) The receipts column of the Cash Book has been over added by Rs. 1940.
c) Several cheques, totaling Rs. 6,000 were issued to different suppliers. Of these, cheques worth Rs. 1,500 were debited in Pass Book on 2nd January, 2014 and Rs. 2,500 on 4th January. The balance being debited before 31st December, 2013.
d) Bills discounted, got dishonored Rs. 750.
e) A cheque ofRs. 400 was credited in Pass Book, but was not recorded in Cash Book.
f) Uncredited cheque Rs. 1,000
Bank Reconciliation Statement of Reddy’s as on 31st December 2013
On 31st December, 2013 the Cash Book showed an unfavourable balance Rs. 29,000. Prepare a Reconciliation Statement with the following information.
a) Cheques had been deposited into the bank but were not collected Rs, 4,530
b) A cheque issued to Karthik Reddy, the supplier, has not been encashed Rs. 5,040.
c) There was a debit entry in the Pass Book ofRs. 600 for bank charges.
d) Bills worth Rs. 2000 were discounted but dishonored.
Bank Reconciliation Statement as on 31st December 2013
From the following particulars prepare a Bank Reconciliation Statement.
a) Bank Overdraft as per Cash Book Rs. 16,100
b) Debit side of the bank column of Cash Book cast short Rs. 200
c) Bills collected directly by bank Rs. 3,500
d) Bank charges recorded twice in the Cash Book Rs. 240
e) A cheque deposited as per bank statement but not recorded in the Cash Book Rs. 1100
f) The cheques of 6,000 deposited but collections as per statement Rs. 2,600
g) Interest on investment collected by the banker, same was shown only in Pass Book Rs. 2,000
Bank Reconciliation Statement
From the following particulars prepare Bank Reconciliation Statement as on 31st March, 2014.
a) Overdraft balance as on 31-3-2014 as per Bank statement Rs. 22,470.
b) As per standing instructions given to bank, Chamber of Commerce fee Rs. 2,530 was paid by the bank but was not recorded in the Cash Book.
c) On 23-3-2014, the credit side of the bank column of the Cash Book was cast Rs. 1,900 short.
d) Cheque deposited into the bank but not recorded in Cash Book Rs. 2,500
e) In the Cash Book, a Bank charge ofRs. 290 was recorded twice while another bank charge of Rs. 120 was not recorded at all.
f) Divided on shares Rs. 3,200 was collected by bank directly the trader has no information.
g) Two cheques ofRs. 1850 and Rs. 1,500 were issued but out of them only one cheque ofRs. 1850 was presented for payment up to reconcile day.
Bank Reconciliation Statement as on 31.03.2014
Prepare Bank Reconciliation statement ofKarthik as on 31 – 03 – 2014.
a) Bank overdraft as per Pass Book Rs. 6,500
b) Cheques deposited into bank Rs. 5,000, but only Rs. 2,000 was collected.
c) Cheques issued but not presented for payment Rs. 1500
d) A customer directly deposited in our bank Rs. 1200
e) Bank charges Rs. 200; Insurance premium Rs. 300 has debited in the Pass Book only
f) Divided Rs. 300 collected by the bank has credited in the Pass Book only
Bank Reconciliation Statement of Karthik as on 31.03.2014
Prepare Bank Reconciliation Statement of P.R.G. Rao & Sons as on 31.03.2014
a) Bank overdraft as per Cash Book Rs. 14,500
b) Cheques issued but not yet presented for payment Rs. 4,500
c) Directly deposited by a Customer in our bank account Rs. 3,500.
d) Cheques deposited in bank but not credited Rs. 7,500
e) Bank charges debited in pass book only Rs. 200
f) Interest debited in the pass book only Rs. 500
Bank Reconciliation Statement of P.R.G. Rao as on 31.03.2014
Visit any business careers and enquire about what discrepancies generally they notice in the items. Make a list of the discrepancies and show the effect on the bank balance.