Bank Reconciliation StatementClass 11 Financial Accounting 1 NCERT Solutions

Bank Reconciliation Statement as at March 31, 2017

Bank Reconciliation Statement as on March 31, 2017

Bank Reconciliation Statement

Bank Reconciliation Statement as on December 31, 2016

Bank Reconciliation Statement as on March 31, 2017

Bank Reconciliation Statement as on December 31, 2017

Bank Reconciliation Statement as on December 31, 2016

Bank Reconciliation Statement

Bank Reconciliation Statement as on December 31, 2016

Bank Reconciliation Statement as on January 01, 2017

Bank Reconciliation Statement as on December 31, 2017

Bank Reconciliation Statement as on December 31, 2017

Bank Reconciliation Statement as on December 31, 2017

Bank Reconciliation Statement as on March 31, 2017

Bank Reconciliation Statement as on March 31, 2017

Bank Reconciliation Statement (Account No. I) as on March 31, 2017

Bank Reconciliation Statement as on March 31, 2017

Bank Reconciliation Statement as on March 31, 2017

• To identify reasons for difference: It helps in ascertaining the specific causes, such as unpresented cheques, uncollected cheques, bank charges, etc., that lead to a discrepancy.
• To detect and prevent errors: By comparing the two records, errors made either by the business or the bank can be identified and rectified promptly.
• To ascertain the correct bank balance: It helps in determining the actual, correct bank balance on a specific date.
• To update the cash book: It provides information about transactions like bank charges, interest credited, and direct deposits, which helps in updating the cash book.

1. Cheques issued but not yet presented for payment: The firm records the payment as soon as a cheque is issued, reducing the cash book balance. However, the bank only reduces its balance when the cheque is actually presented for payment by the recipient, which may happen later.
2. Cheques paid into the bank but not yet collected: The firm records the receipt as soon as a cheque is deposited, increasing the cash book balance. The bank, however, only increases the account balance after the cheque has been cleared and the amount is realized, which can take a few days.

1. Start with the unadjusted balance: Take the balance as per the bank column of the cash book before any adjustments.
2. Record unrecorded debits: Examine the passbook credit entries (like interest collected, dividends received, direct deposits by customers) that have not been recorded in the cash book. Record these on the debit side of the cash book's bank column.
3. Record unrecorded credits: Examine the passbook debit entries (like bank charges, interest on overdraft, direct payments made by the bank) that have not been recorded in the cash book. Record these on the credit side of the cash book's bank column.
4. Correct errors: Rectify any errors committed in the cash book, such as wrong amounts recorded, omissions, or wrong totalling.
5. Calculate the new balance: After making all the above entries, balance the bank column of the cash book. This new balance is the 'correct' or 'adjusted' cash book balance, which is then used as the starting point for the bank reconciliation statement.

• To Reconcile Balances: The primary purpose is to identify and account for all the items that cause a difference between the bank balance recorded by the business and the balance shown by the bank.
• To Detect Errors: The process of reconciliation helps in discovering errors, such as incorrect entries, omissions, or wrong calculations, made either by the firm in its cash book or by the bank in the passbook.
• To Prevent Fraud: Regular reconciliation can deter and detect fraudulent activities, as any unauthorized withdrawals or discrepancies would be quickly identified.
• To Update Records: It brings to light transactions that the business may not be aware of, such as bank charges, interest credited by the bank, or direct deposits by customers. This allows the business to update its cash book and have a more accurate record of its finances.
• To Ascertain Correct Bank Balance: By accounting for all discrepancies, the BRS helps in determining the true bank balance of the business on a given date, which is crucial for financial planning and control.

• Cheques issued but not yet presented: The business credits its cash book immediately, but the bank debits the account only when the cheque is presented for payment.
• Cheques deposited but not yet collected: The business debits its cash book upon deposit, but the bank credits the account only after the cheque is cleared.
• Direct debits by the bank: The bank debits the account for charges, standing orders (like insurance premiums, rent), or interest on overdraft, but the business records it later upon receiving the bank statement.
• Amounts directly deposited into the bank: Customers may deposit money directly into the firm's account. The bank credits the account immediately, but the firm records it only after being notified.
• Interest and dividends collected by the bank: The bank credits the firm's account upon collection, while the firm records it later.
• Cheques/bills dishonoured: A dishonoured cheque or bill is debited by the bank immediately, but the firm may not record the reversal entry until it receives the information.

• Errors committed by the firm: These can include incorrect recording of amounts, omitting a transaction, recording a transaction twice, or errors in totalling and balancing the cash book.
• Errors committed by the bank: The bank can also make mistakes, such as crediting or debiting the wrong account, recording an incorrect amount, or omitting a transaction.

• Start with the existing cash book balance.
• Debit the cash book (bank column) for:
  • Interest and dividends collected by the bank.
  • Direct deposits made by customers.
  • Any credit given by the bank not yet recorded.
• Credit the cash book (bank column) for:
  • Bank charges and interest on overdraft debited by the bank.
  • Direct payments made by the bank on standing instructions.
  • Dishonour of cheques or bills discounted.
• Correct any errors made in the cash book (e.g., wrong amount, double posting).
• Calculate the new balance. This is the 'Adjusted' or 'Amended Cash Book Balance'.

• Start with the Adjusted Cash Book Balance (calculated in Step 1).
• Add: Cheques issued by the firm but not yet presented for payment to the bank.
• Less: Cheques deposited by the firm but not yet collected or credited by the bank.
• Adjust for Bank Errors: Add amounts wrongly debited by the bank and subtract amounts wrongly credited by the bank.
• The final resulting figure should be equal to the balance as per the passbook.

1. Time Gap (✓): This is a timing difference as the cheque is recorded by the firm immediately but by the bank only upon presentation.
2. Errors made by business/bank (✓): This is an error in recording the transaction committed by the business firm.
3. Time Gap (✓): This is a timing difference because the bank has recorded the transaction, but the firm will only record it after receiving the bank statement.
4. Time Gap (✓): This is a timing difference as the firm records the deposit immediately, but the bank credits the account only after the cheque is cleared.
5. Time Gap (✓): This is a timing difference as the bank deducts the charges, but the firm is unaware until it sees the bank statement.

1. True: The passbook is a copy of the customer's account as maintained in the bank's records.
2. True: The primary purpose of a BRS is to identify and explain the differences between the cash book's bank balance and the passbook's balance.
3. False: Cheques issued but not presented for payment have already reduced the cash book balance, but the passbook balance remains higher until the cheques are actually presented and paid by the bank.
4. True: When cheques are deposited, the cash book balance is increased immediately. The passbook balance only increases after the bank collects the amount, so temporarily the cash book balance is higher.
5. False: When a cheque is deposited, the overdraft in the cash book reduces. However, the overdraft in the passbook remains high until the cheque is collected. Therefore, the overdraft as per the passbook is more than the overdraft as per the cash book.
6. True: A debit balance in the cash book represents cash at the bank (an asset for the firm), which is a liability for the bank and thus shown as a credit balance in its books (the passbook).
7. True: When a firm issues a cheque, it immediately reduces its cash book balance. The passbook balance remains higher until the cheque is presented for payment. Thus, the cash book balance is less than the passbook balance.
8. True: Direct collections increase the passbook balance as soon as the bank receives the money. The firm's cash book balance will be lower until it is informed of the collection.
9. False: Payments made by the bank on standing instructions reduce the passbook balance immediately. The cash book balance will be higher until the firm records these payments. Therefore, the passbook balance will be less than the cash book balance.