Bank Reconciliation Statement Test - 37

Bank Reconciliation Statement

As on March 31, 2021

Unfavorable bank balances indicate a debit balance in the passbook, meaning withdrawals exceed deposits. This results in less cash available than recorded in the bank statement. It implies a shortfall between recorded and actual cash, impacting financial stability. Addressing this imbalance is crucial to maintain accurate financial records and ensure effective cash management.

Passbook balance = - ₹ 7,500

 It is found that there were unpresented cheques amount =- ₹ 2,000

Uncredited deposits amount = ₹ 1,000

Cash book amount = - 7500 - 2000 + 1000 = - 8500

Overdraft as per cash book is ₹ 8,500.

Cheques paid into the bank for collection but not yet credited it will result in a higher balance in the bank column of cash book in comparison to passbook.

When firm receives cheques from its customers (debtors), they are immediately recorded in the debit side of the cash book. This increases the bank balance as per the cash book. However, the bank credits the customer account only when the amount of cheques are actually realised. The clearing of cheques generally takes few days especially in case of outstation cheques or when the cheques are paid-in at a bank branch other than the one at which the account of the firm is maintained. This leads to a cause of difference between the bank balance shown by the cash book and the balance shown by the bank passbook.

‘NSF’ marked in cheque sent back by the bank indicates not sufficient funds. A cheque returned by bank marked "NSF" means that There are not sufficient funds in your account. Non sufficient funds (NSF) is a term used in the banking industry to indicate that a cheque cannot be honored because insufficient funds are available in the account on which the instrument was drawn.

The adjusted balance as per cash book is as follows:

Passbook balance = - Rs. 9,500

It is found that there were unpresented cheques amount = - Rs. 3,000

Uncredited deposits amount = Rs. 2,000

Cash book amount = - 9,500 - 3000 + 2000 = - Rs. 10,500

Overdraft as per cash book is Rs. 10,500.

The various steps to completing a bank reconciliation typically include:

• Obtain bank records and collect your company records.
• Find a place to start, check the income and expenses in your books, and go over your bank withdrawals and deposits.
• Adjust the cash balance by reconciling any differences between your company's records and the bank statement.
• Compare the end balances after adjustments have been made.
• Adjust the bank statements if necessary to ensure accuracy.

A bank reconciliation statement is a document that serves as a memorandum statement. It's a statement prepared periodically (often monthly) by a company to reconcile the differences between the cash balance reported in the company's cash book (or ledger) and the cash balance reported by the bank in the bank statement.

The bank reconciliation statement acts as a memorandum because it outlines the adjustments needed to ensure that the company's cash records align with those of the bank. It highlights any discrepancies between the two sets of records, such as outstanding checks, deposits in transit, bank charges, and errors. Once adjustments are made, the cash balance in the cash book should reconcile with the bank statement balance.

Bank Reconciliation Statement

As on March 31, 2023