Bank Reconciliation Statement
A bank reconciliation statement is prepared to reconcile the difference in the balances of bank statement received from bank and the cash book prepared by the business
Reasons for the difference between cash book (bank column) balance and the bank statement balance.
1. Cheques issued but not yet presented to the bank for payment.
2. Cheques deposited but not collected and credited in the bank statement.
3. Bank charges recorded in the bank statement but not recorded in the cash book.
4. Direct deposits by a customer or debtor into the bank account not recorded in the cash
book.
5. Payments made by the bank as per standing order, recorded in the bank statement but
not recorded in the cash book.
6. Direct debits in the bank statement only.
The format of Bank Reconciliation Statement
Bank reconciliation statement as at …………………………………….
| Balance as per updated cash book | xxxxx |
| Add Unpresented cheques :- | xxxx |
| Less Uncredited deposits |
(xxxx) |
| Balance as per bank statement | xxxxxx |
In case the updated cash book is having a credit balance,(overdraft) the above addition and subtraction will be reversed
Key points:
Unpresented cheque:
A cheque paid by you but not yet passed through the banking system
* The cheque not yet produced to the bank to take money from our a/c (or)
* The cheque is deposited in his a/c but money not yet transferred from our a/c to his a/c
Credit Transfer: (Bank Giro credit)
Debtors/ someone directly pay their amount in our bank a/c but we come to know it later.
Dividend and interest bank collects:
Bank collects dividends and interest from where we have invested our money.
Uncredited deposits: (Uncredited Cheques)
The cheque received by you but not yet passed through the banking system.
(i.e. we receive cheques from customers, and deposit in our bank a/c but the amount of
money not yet transferred or added to our a/c)
Bank Charges:
Bank charges some amount of money for the service it provides to us. It is deducted
from our a/c.
Standing Order:
We give instructions to the bank to pay regular amount of money to whom we have to
pay every month. Eg: Pay 200 every month to a Society.
Direct debit:
This is also as same as standing order but we give permission to those, whom we have
to pay, to obtain money directly from our bank a/c. In this case the amount not regular
but it may vary from time to time. Eg: Electricity bill, telephone bill.
Steps to draw out Adjusted Cash Book and BRS:
01. Check the opening balance of both the Cash book and bank statement to ascertain the
two balances are the same.
02. Compare the cash book Dr Column (receipt) with the Cr column of bank statement,
tick all common items.
03. Compare the cash book credit column (Payment), with the Dr Column of Bank
statement, tick all common items.
04. All items un tiked in the bank statement will be adjusted in the cash book and all items
Un ticked in the cash book will be recorded in the bank reconciliation statement
Assignment Questions of Bank Reconciliation Statement
(1) Vigo’s cash book (bank columns) showed the following entries.
Dr. Cash Book Cr.
|
$ |
$ |
||||
| July 11019
31 |
Balance b/dCashParker
Cash |
1 450 500 260 200 |
July 71624
|
SinghRobinsonKings |
920 480 220 |
The following bank statement was received by Vigo.
| Date | Details | Withdrawn$ | Paid in$ | Balance$ |
| July 11012
19 21 22 25 31 |
Balance b/fCashSingh
Parker Robinson Dishonoured cheque – Parker Dividend Bank charges |
920 480 260 20 |
500 260 25 |
1 450 1 950 1 030 1 290 810 550 575 555 |
REQUIRED
(a) Calculate the cash book balance on 31 July. Prepare and update the cash book. Bring down the balance.
(b) Prepare a bank reconciliation statement to reconcile the adjusted cash book balance with the bank statement balance at 31 July 2004.
(c) Explain how the cash book is both a book of prime entry and a ledger account.
(2) Murray’s Cash Book (bank columns) for May 2001 was as follows:
Dr. Cash Book Cr.
|
$ |
$ |
||||
| May11526
31 |
Balance b/dCashCurry
Cash |
1 200 450 120 150 |
July 51925
|
KlerkLeeGupta |
540 180 100 |
The following bank statement was received by Murray in early June.
|
Date |
Details |
Payments $ |
Receipts $ |
Balance $ |
|
May 1 1 15 16 22 26 30 30 31 |
Balance b/f Bank error corrected –contra 30 April Cash Klerk Lee Curry Unpaid cheque — Curry Dividend Bank service charges |
540 180 120 170 |
160 450 120 180 |
1 040 1 200 1 650 1 110 930 1 050 930 1 110 940 |
You may assume that the bank balance was successfully reconciled at the end of April.
Required:
(a) Bring the Cash Book up to date, starting with the present balance at 31 May 2001.
(b) Prepare a statement, under its correct title, to reconcile the difference between your amended Cash Book balance and the balance in the bank statement on 31 May 2001.
(c) State the amount of the bank balance which would appear in Murray’s Balance Sheet as at 31 May 2001.
(3) Mr. Rahim’s Cash Book (Bank columns only) for the month of October 2007 was as follows.
Dr. Cr.
|
$ |
$ |
||||
| Oct 1
4 16 24 25 31 |
Balance b/dCashSutton
Cash Dobie Cash |
800 300 220 70 80 100 1 570 ==== |
Oct 2
10 23 26 31
|
UnwinThompsonMorgan
Petty Cash Balance c/d |
120 1 025 360 50 15
1 570 ==== |
The following bank statement was received in early November2007.
| Date1993 |
Details |
Payments $ |
Receipts $ |
Balance $ |
| Oct 114
8 10 16 17 24 25 26 28 31 |
Balance b/fError corrected –contra 30 SeptemberCash
Unwin Banker’s Order –Fire Insurance Cheque Thompson Cash Cheque Petty Cash Unpaid Cheque – Dobie Interest on Deposit a/c |
120 105 1 025 50 80 |
100 300 220 70 80 80 |
700 800 1 100 980 875 1 095 70 140 220 170 90 170 |
Required:
(a) Bring the Cash Book up to date, starting with the present balance of $15 brought forward on 31 October 2007. (There is no need to copy down the whole Cash Book as shown above).
(b) Prepare a statement, under its correct title, to reconcile the difference between your amended Cash Book balance and the balance in the bank statement on 31 October 2007.
(c) State the amount of the bank balance which would appear in Dean’s Balance Sheet for 31 October 2007.
(4) Kylie Johnson’s cash book (bank columns) had a debit balance of $460 on 30 April 2006. Use
The bank statement at the same date showed that Kylie had a balance at the bank of $323.
On checking the cash book against the bank statement the following differences were found.
1 A debtor, Nancy Tan, paid $80 directly into the bank. This had not been recorded in the cash book
2 Bank charges, $50, were included on the bank statement but had not been recorded in the cash book.
3 Insurance paid, $32, was recorded on the bank statement but not in the cash book.
4 A cheque, $140, sent to a creditor had not yet been presented to the bank for payment.
5 A transfer of $125 from the business bank account to Kylie’s private bank account had been entered in the cash book but not on the bank statement.
6 An amount of $400 paid into the bank on 29 April did not appear on the bank statement.
REQUIRED
(a) Starting with the balance on 30 April 2006, update the cash book and bring down the amended balance.
(b) Prepare the bank reconciliation statement to reconcile the adjusted cash book balance Use with the bank statement balance at 30 April 2006
(c) Explain how the following would appear in the ledger accounts of Kylie Johnson:
(i) Bank overdraft;
(ii) Short term loan from the business to Kylie Johnson.
(5) Sally Major’s cash book (bank column) had a debit balance of $619 on 31 July 2009. The bank statement balance on 31 July 2009 was $1594 credit.
After checking the cash book against the bank statement the following differences were found:
1 A cheque for $710 issued to Jon Fletcher had not been presented to the bank for payment.
2 An amount of $1150 paid into a local bank branch by Sally did not appear on the bank statement.
3 Bank charges of $170 were shown on the bank statement, but had not been recorded in the cash book.
4 Dividends received, $80, were shown on the bank statement but had not been recorded in the cash book.
5 A payment of $5 cash for travel expenses had incorrectly been credited in the bank column of the cash book.
6 The bank statement showed a bank loan for $1500 had been transferred into the bank current account. Sally Major was not expecting this transfer to take place until 1 August and had not yet recorded the transaction in her books.
Prepare the updated cash book and the bank reconciliation statement
Bank Reconciliation Statement.
MCQ
01. A cheque paid by you, but not yet passed through the bank system is,
A. A standing order.
B. A dishonoured cheque
C. A credit transfer
D. An unpresented cheque
02. Over draft in the bank statement is highlighted by
A. Debit balance
B. Credit balance
C. Nil balance
D. Debit and credit balance
03. Dishonoured Cheques are recorded in the
A. Adjusted cash book-credit side
B. Adjusted cash book-debit side
C. Added to bank statement balance
D. Deducted from bank statement balance
04. Bank reconciliation statement is drawn to reconcile
A. Cash book with Bank Account Column of Cash book
B. Cash at bank account with bank statement
C. Cash Book and ledgers
D. The bank statement
05. In adjusting the cash balance, which of the following is not taken into account?
A. Mistakes in the cash book
B. Errors of last month corrected in the bank statement
C. Interest and dividend credited in bank statement
D. Salaries paid by bank
06. A bank overdraft is best described as
A. A firm wasting its money
B. Having more receipts than payments
C. A firm having bought too many goods
D. A firm having paid more out of its bank account than it has put in it
07. Bank reconciliation statement is prepared by
A. Bankers
B. Accountant of the business
C. Auditors
D. Owners of the business
08. A cheque received by you, but not yet passed through the bank system is,
A. A standing order.
B. A dishonoured cheque
C. Bank lodgments not yet credited
D. An unpresented cheque
09. The cheques which are issued for payments, but not taken into the bank for payment are
A. Uncredited cheques
B. Unpresented cheques
C. Uncleared cheques
D. Dishonoured cheques
10. A business maintains a two column cash book. At 1st June, the debit balance of the bank column
was $ 500. Transaction during June were:
Cheques banked $ 120,
Cheques drawn for cash $ 50.
What was the debit balance of the bank column at the end of June?
A. $ 330
B. $ 430
C. $ 570
D. $ 670
11. The table shows extracts from a business’s bank reconciliation statement.
| $ | |
| Cash book balance in hand at 31 December |
Balance per bank statement at 31 December
Bank charge per bank statement not entered in cash book
Outstanding cheques not presented at the year end2075
2250
150
325
What is the bank balance to be shown in the financial statement?
A. $ 1600
B. $ 1925
C. $ 2075
D. $ 2225
12. Of all the items given, which would be added when attempting reconciliation starting with the
cash book?
A. Cheque not credited by the bank
B. Bank charges
C. Cheques not presented for payment at the bank
D. Items that cause the cash book balance to be larger than that shown on the bank statement
13. A cash book has separate column for bank and cash transaction. At 1st March, the balance on the
cash account was $ 200. Transaction during March were,
Cash banked $ 30
Cheque drawn for cash $ 70
What was the balance on the cash account at end of March?
A. $ 100
B. $ 160
C. $ 170
D. $ 240
14. Which statement is sent by the bank to its customers i.e. business to verify the balance at bank,
at the end of the month?
A. Bank statement
B. Statement account
C. Cash statement
D. Bank reconciliation statement
15. Cheques given by debtors not honored by their banks are,
A. Uncredited cheques
B. Unpresented cheques
C. Standing order
D. Dishonoured cheques
16. Unpresented cheques are added to the
A. Bank statement balance in the reconciliation statement
B. Overdraft in adjusted cash book
C. Adjusted cash book balance
D. Opening balance of the cash book
17. On 20th May 2006, S.Fusna’s bank statement shows a balance of $ 1750, but the cash book
shows a balance of $ 2500. Fusna finds cheques totaling $ 750 have not been banked. Which
bank balance figure will appear in Fusna’s balance sheet on 31th May 2006?
A. $ 1000
B. $ 1750
C. $ 2500
D. $ 3250
18. S.Vaseem receives a bank statement, which does not agree with his book balance. Which of the
following is not responsible for this difference?
A. Cheques paid in, have not been credited
B. The bank has charged overdraft interest
C. A cheque sent to supplier has not been presented
D. Furniture purchased for cash
19. Bank reconciliation statement can be defined as one which,
A. is sent by bank to their customers
B. is sent by banks to customers, who exceeds their agreed credit limit with the bank
C. explains the difference between bank balance of cash book, and its bank statement
D. None of the above
20. Cheques issued six month ago,
A. Should be included in the Bank reconciliation statement
B. Should be shown in the balance sheet under the heading accrual’s
C. Should be cancelled
D. Are stale cheques
21. Which one of the following does not create a difference between the bank balance of the firm
and the balance shown by the bank statement?
A. Errors made by the firm’s bank
B. Cheques written by the firm which have not yet appeared on its bank statement
C. Lodgments made by the firm which have not yet appeared on its bank statement
D. None of the above
22. Bank reconciliation statement is prepared to,
A. Record receipts and payments
B. Equalize the cash book balance and bank statement balance
C. Record banking transactions
D. None of the above
24. A cash book (bank Column) showed a balance of $ 1973 (credit) at 31st March the following
items did not appear in the bank statement at that date.
Unpresented cheques $ 942
Cheques banked $ 865
What was the balance on the bank statement at 31st March?
A. $ 1896 (credit)
B. $ 1896 (credit)
C. $ 2050 (debit)
D. $ 2050 (debit)