Bank Reconcilation Statement

8/8/2019 Bank Reconcilation Statement

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Group MembersGroup Members

M. Kaleem (Leader) 13

Ashiq Hussain 06

Rana Shoaib Ayaz 26

Maryam Shakoor 21

Aimen Farooq 38

Nafeesa Asghar 32

Group Members



Bank Reconciliation statement



Sir Saleem Abbas



Bank Reconciliation

A bank reconciliation is prepared periodically toexplain the difference between cash reported on thebank statement and the cash balance on company¶sbooks.

It is just a procedure to prove the balance of Cash Book

and the it is prepared when the Bank Statement isreceived.



Cash book and Pass Book

E E ED Eo n: Cash Acct. No.

BaanDa I P D b Cred D CR)

Ma Baan e 2,481.18

First National BankNashville, TN 37459 May 31, 2002

Clothes MartNashville, TN

Acct No 278609

PreviousBalance Total Checks

TotalDeposits

CurrentBalance

1488.79 1,367.09 2,604.22 2,725.92 5/1 107 55.00 5/2 1,251.88 5/4 108 279.50 5/7 109 44.75 5/9 110 21.81

5/12 111 37.55 5/15 825.04 5/18 112 175.98 5/21 113 288.31 5/27 114 12.54 5/30 527.30 5/31 115 451.65

Bank Statement

Cash b ook

Pass b ook



Why are the balances different?

The reason is that on 31stMay the balance in the CashBook (General Ledger) andbalance in Bank Statement(Pass Book) is not equal, asseen in circles

GE ERAL LEDGER

Account: Cash Acct. No. 1 2 Balance

Date Item P R Debit Credit D R(CR)May 31 Balance 2,481.18

First National BankNashville, TN 37459 May 31, 2002

Clothes MartNashville, TN

Acct No 278609

PreviousBalance Total Checks

TotalDeposits

CurrentBalance

1488.79 1,367.09 2,604.22 2,725.92 5/1 107 55.00 5/2 1,251.88 5/4 108 279.50 5/7 109 44.75 5/9 110 21.81

5/12 111 37.55 5/15 825.04 5/18 112 175.98 5/21 113 288.31 5/27 114 12.54 5/30 527.30 5/31 115 451.65

Bank Statement



Causes of differences

Timing

Transaction

rror



Timing

T here may be a gap of time between recording of

transaction in the customer's book and bank'sstatement.



Transaction

S ome differences may arise from the bank's action that

have not been intimated to the customer.



Error

Some differences may arise when errors arecommitted by the bank or by the person who dealswith the cash book.



Need for Bank ReconciliationStatement

t reflects the actualbank balance.t helps to detect any

mistake in the cash bookand in the pass bookt prevent frauds in

recording the banktransactions.t explains the delay in

the collection of cheques.



There are some terminologies used in the

banking transaction .

Terminologies



Terminologies

Cheques issued but not yet presentedCheques deposit but not yet collected

eposit in transitishonored (NSF) cheques

Cheques issued but dishonoredBank charges not entered in the cash booknsurance premium paid by banknterest credited by bank

Amount directly deposited by debtor ividend collected



When a cheque is issued to a supplier, it isimmediately entered in the Cash Book . But thereceiving party not present to the bank for payment.

These cheques are also known as Unpresented /Cheque issued / drawn but not paid.

Outstanding Cheques

Example

Cheques issued but not present up to31st March Rs.1,075.



Outstanding Cheques

X .Y.Z & Co.Bank Reconciliation S tatement

A s on 31st March 2008

Cheque issued but not presented 1,075

Effect



Uncleared cheques

These are the cheques which are deposited but notyet collected by bank.These are also known as

Uncollected / Uncredited / Uncleared Cheque.

Example

Check paid in but not cleared andcredited Rs.1,700.



Uncleared cheques



Cheque deposited but not cleared 1,700

Effect



Dishonored (NSF) cheques

Example

When bank finds that account of the maker does nothave sufficient funds, the bank intimates to thedepositors that the cheque has been dishonored.( NSF means Not Sufficient Funds )

A cheque of Rs.500 depositedinto bank, but dishonored.



Dishonored (NSF) cheques



Dishonored cheque 500

Effect



Deposit in transit

Example

A deposit of Rs. 500 made after thebanking hours on march 31st doesnot appear in bank statement.

Some times, cash receipts recorded in the CashBook are sent to the bank for deposit, but it is sent

too late to be included in the bank statement for thecurrent period.



Deposit in transit



Deposit in transit 500

Effect



Cheques issued but dishonored

Example

When a cheque is issued to a supplier, in the CashBook account is credited. On presentation of thecheque into the bank for payment, bank refused topay the amount on account of non-sufficient of deposits.

Cheque issued for Rs. 2500,but dishonored.



Cheques issued but dishonoredX .Y.Z & Co.

Bank Reconciliation S tatementA

s on 31st March 2008

Check issued but dishonored 2500

Effect



Bank charges

Example

The Bank charges some amount from depositor¶saccount by way of incidental charges, collection

charges, interest charges on bank overdraft andservice charges etc.

Bank Charges interest of Rs. 150on overdraft.



Bank chargesX .Y.Z & Co.

Bank Reconciliation S tatementA

s on 31st March 2008

nterest on overdraft 150

Effect



When the bank pays insurance premium etc. onthe behalf of its customer, it would debit thecustomer¶s account, but the customer will know

about it only when he receives the bank statement.

nsurance premium paid by bank

Example

Bank paid the insurancepremium on the behalf of thecustomer Rs.2,000.



Insurance premium paid by bank


As on 31st March 2008

Insurance premium paid by bank 2000

Effect



Interest credited

Example

When the bank allows interest on investment /government securities to a customer, it credits thecustomer¶s account and his bank balance will

increase. But comes to know by receiving bankstatement.

Interest on investment Rs.1,500.



Interest credited by bank



Interest on investment 1500

Effect



Amount directly deposited by debtor

Example

A customer Mr. Bashir deposited a cheque of Rs.1,000directly into bank firm¶s bank account but no entrywas passed in Cash Book.





Dividend collected by bank

Example

When the bank collects dividends , it would creditthe customer¶s account and his bank balance willincrease

Dividend collected on Govt. securities bybank of Rs. 50.



Dividend collected by bank



Dividend collected on Govt. securities 50

Effect



Bank Reconciliation



Reconciling Items Bank Statement Balance

D educt : Outstandingchecks.

Add : D eposits intransit.

Add or D educt : Bankerrors.

Book Balance Add : unrecordedreceiptsD educt : unrecordedpaymentsdeduct : servicecharges, interestdebited

Add : Collectionsmade by the bank. Add or D educt :Book errors.



Bank Reconciliation Example Let¶s prepare a July 31 bank reconciliation

statement for the Simmons Company.

The balance of $ July 31 bank statementindicated a 9,610 .The cash general le dger account on thatdate shows a balance of $7,430.

Additional information necessary for thereconciliation is shown on the next screen.



Bank Reconciliation Example Let¶s prepare a July 31 bank reconciliation

statement for the Simmons Company.

The July 31 bank statement indicated abalance of $9,610.The cash general ledger account on thatdate shows a balance of $7,430.

Additional information necessary for thereconciliation is shown on the next screen.



Bank Reconciliation ExampleOutstanding checks totaled $2,417.

A $500 check mailed to the bank for deposit had notreached the bank at the statement date.

The bank returned a customer¶s NSF check for $225received as payment on account receivable.

The bank statement showed $30 interest earned duringJuly.

Check No. 781 for supplies expense cleared the bankfor $268 but was erroneously recorded in our books as$240.

A $486 deposit by Acme Company was erroneously

credited to our account by the bank.



Bank Balance, July 31 9,610$Add: eposit in Transit 500 Less: Bank rror 486$

Outstanding Checks 2,417 (2,903) Adjusted Balance, July 31 7,207$

Book Balance, July 31 7,430$

Add: nterest 30 Less: Recording rror 28$

NSF Check 225 (253) Adjusted Balance, July 31 7,207$

Simmons CompanyBank Reconciliation

July 31, 2004



July 31 Cash 30 Interest revenue 30

July 31 Supplies expense 28

Accounts receivable 225 Cash 253

Recording Adjusting Entries from aBank Reconciliation

Only a m ounts sho wn on the boo k portion o f the reconciliation re q uire an a dj ustin g entry .



Recording Adjusting Entries from BankReconciliation

After posting the reconciling entries the cashaccount looks like this . . .

AAccount Cash Acct o

Balancea te te e it Cre it C

Jul Balance 4

A usting entr 4 A usting e ntr

A uste alance on Jul .



Any Question !



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Bank Reconcilation Statement

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