Bank Reconciliation Statement Test - 36

The balance of the reconciliation of the cash ledger book reconciling with the cash in the register is an example of segregation of responsibilities. This is because it involves separating the duties of maintaining the cash ledger book (typically handled by accounting or finance personnel) from those responsible for handling the physical cash in the register (such as cashiers or other operational staff). This segregation helps ensure that different individuals or departments are responsible for different aspects of cash handling, reducing the risk of errors or fraud.

When Jubin Ltd. records the receipt of the Rs. 100 check in its cash book and deposits it on the same day, the bank statement sent on that day might not include this transaction yet. The bank has not yet credited the company's account with the Rs. 100 deposit, so it is considered an "uncredited deposit" from the bank's perspective.

On the bank reconciliation statement, this discrepancy is shown by adding the uncredited deposit of Rs. 100 to the bank statement balance. This adjustment reflects the true cash position by reconciling the difference between the company's records (cash book) and the bank's records (bank statement). Adding the uncredited deposit ensures that the bank statement balance accurately reflects the deposit made by the company.

To find the bank statement balance, we need to adjust the passbook balance for the transactions mentioned:

1. The debtor's deposit of Rs. 500 should increase the balance.
2. Bank charges of Rs. 30 should decrease the balance.

Given that the passbook balance is overdrawn by Rs. 2,000, this means the actual balance is negative Rs. 2,000.

Adjusting for the debtor's deposit of Rs. 500, the balance becomes negative Rs. 1,500.

Adjusting for the bank charges of Rs. 30, the balance becomes negative Rs. 1,530.

So, Bank Statement balance is Rs. 1530(Debit).

Bank Reconciliation Statement 

At 31st March, 2023

If the balance shown in the Cash Book is a credit balance and the balance shown in the Bank Statement is a debit balance, or vice versa, then we can say they are "opposite" balances. The term "opposite" refers to the scenario where the balance in the Cash Book has a different nature (debit or credit) compared to the balance in the Bank Statement. For example, if the Cash Book shows a credit balance while the Bank Statement shows a debit balance, they are considered opposite balances. This discrepancy could arise due to timing differences in recording transactions between the company's records and the bank's records, highlighting the need for reconciliation.

An unadjusted balance in the cash book typically arises due to the result of the omission of bank charges. Bank charges represent fees or charges levied by the bank for various services, such as maintenance fees or transaction charges. If these bank charges have been incurred but haven't been recorded in the cash book, it would result in an unadjusted balance. This omission means that the cash book balance doesn't accurately reflect the true cash position due to the absence of these charges. Adjusting for these charges ensures that the cash book balance is accurate and complete, reflecting all relevant transactions and charges incurred.

When cash is deposited into a bank account, the appropriate account to be debited in the company's accounts is Bank account. Depositing cash into a bank account increases the balance of that bank account. In accounting, increases in asset accounts are recorded as debits. Therefore, when cash is deposited into a bank account, the bank account is debited to reflect the increase in funds held by the bank on behalf of the company.

The reason behind preparing a Bank Reconciliation Statement is primarily to help in locating and rectifying errors or omissions committed either by the firm or by the bank. By comparing the company's cash book with the bank statement, discrepancies can be identified and corrected, ensuring the accuracy of financial records and transactions.

There are three ways to prepare the bank reconciliation namely:

• Take the book balance and reconcile it to the bank balance
• Take the bank balance and reconcile it to the book balance
• Take the book balance and reconcile it to an adjusted cash balance, then take the bank balance and reconcile it to the adjusted cash balance

A Bank Reconciliation Statement is a document used to reconcile the differences between the cash balance as per the company's Cash Book (or records) and the cash balance as per the bank statement. It lists and explains the reasons for the discrepancies between the two balances, such as outstanding checks, deposits in transit, bank charges, and errors. By reconciling these differences, the Bank Reconciliation Statement ensures that the cash balances in the company's records match those in the bank's records.