2. Unfavourable balance/overdraft balance
(a) Credit balance as per cash book (i.e. overdraft) is given and the balance
as per pass book is to be ascertained. (b) Debit balance as per pass book (i.e. overdraft) is given and the balance
as per cash book is to be ascertained. The following steps are taken to prepare the bank reconciliation statement:
(i) Favourable balances:
When debit balance as per cash book or credit
balance as per pass book is given: (a) Take balance as a starting point say Balance as per Cash Book. (b) Add all transactions that have resulted in increasing the balance
of the pass book. (c) Deduct all transactions that have resulted in decreasing the
balance of pass book. (d) Extract the net balance shown by the statement which should be
the same as shown in the pass book. In case balance as per pass book is taken as starting point all transactions
that have resulted in increasing the balance of the Cash book will be added
and all transactions that have resulted in decreasing the balance of Cash
book will be deducted. Now extract the net balance shown by the statement
which should be the same as per the Cash book. (ii) Unfavourable Balance/Overdraft: 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 ‘overdraft balance’ as per Pass Book. This is shown in
the cash book as a credit balance.
Overdraft balance is to be shown in the minus column of statement as the starting point. The other steps shall remain the same as mentioned above. The following illustration helps to understand dealing with the unfavourable balance as per cash book and pass book.
On December 31, 2013, the cash book of the M/s. X shows the credit balance Rs.6, 500. Cheques amounting to Rs.3, 500 deposited into bank but were not collected by the bank. Firm issued cheques of Rs. 1,000 which were not presented for payment. There was a debit in the pass book of Rs.200 for interest and Rs.400 for bank charges. Prepare Bank Reconciliation Statement.
Solution: Bank Reconciliation of M/s. X as on 31
Plus (Amount)Minus (Amount)Overdraft as per cash book
1. Cheque issued but not presented for payment 2. Cheque deposited but not credited by bank 3. Bank charges and Interest charged
Overdraft as per pass book
Prepare Bank Reconciliation Statement of M/s. X on 31
Dec, 2013, from the
following information: Overdraft as per pass book 16,500
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