Financial Accounting

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Lecture – 23Recap

• Bank reconciliation• Balance in our bank book is usually a debit balance, but it

can be credit in case of running finance facility.• Reasons for differences in bank book and bank statement:

Cheques issued but not presented in bank Cheques received / deposited not yet credited by bank Bank charges deducted by bank Profit given by bank Money paid in directly by customers / dealers Payments made by our bank on our standing instructions

Financial Accounting

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Lecture – 23Example 1

• Consider the following data for the month of June of T Company• Balance as per bank book is Rs. 70,240 • Bank statement showed a favourable balance of Rs. 73,920..• Examination of bank book and bank statement revealed the

following: A cheque of Rs. 4,920 paid into bank was not credited by the

bank until July 3rd. A standing order for payment of annual payment of Rs. 1,000

had not been entered into bank book. On 27th June two customers of T Co. paid directly into bank Rs.

5,500, advice of which was received in July. Cheques issued but not presented in the bank amounted to Rs.

4,600. The bank had debited the account by Rs. 500 on account of

bank charges.

Financial Accounting

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Lecture – 23

• Lets assume that T Co. has not closed its books.• You are required to adjust the bank book and then

prepare a bank reconciliation statement.

Financial Accounting

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Lecture – 23Solution

• Following require adjustment in bank book: Payment of an annual subscription Rs. 1,000, not entered

in bank book.Debit Relevant Expense A/c 1,000Credit Bank 1,000

Receipts from two customers of directly into bank Rs. 5,500,

Debit Bank 5,500Credit Customer’s Accounts 5,500

Bank charges Rs. 500 Debit Bank Charges Account 500Credit Bank 500

Financial Accounting

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Lecture – 23

Adjustments in Bank Book

Original Balance As Per bank book 70,240Credit / Less Payment on standing orders (1,000)Credit / Less bank charges (500)Add Receipts from customers 5,500Adjusted balance as per bank book 74,240

Financial Accounting

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Lecture – 23Solution

T. Co. Bank Reconciliation Statement as on June 30, 20—

Balance as per Bank Book 74,240Add Un presented cheques 4,600Less Un credited cheques (4,920)Balance s per bank statement 73,920

Financial Accounting

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Lecture – 23Example 2

• Same data as previous example.• Balance as per bank book is Credit Rs. 56,000• As per bank statement unfavorable balance of Rs. 52,320

Financial Accounting

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Lecture – 23Solution

Adjustments in Bank Book

Original Balance As Per bank book (56,000)Credit / Less Payment on standing orders (1,000)Debit / Add Receipts from customers 5,500Credit / Less bank charges (500)Adjusted balance as per bank book (52,000)

Financial Accounting

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Lecture – 23Solution

T. Co. Bank Reconciliation Statement as on June 30, 20—

Balance as per Bank Book (52,000)Add Un presented cheques 4,600Less Un credited cheques (4,920)Balance as per bank statement (52,320)

Financial Accounting

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Lecture – 23Example 3

• From the following data ascertain the balance as per bank statement of Nasir & Co on March 31, 20-- Balance as per bank book Rs. 63,000 Cheques issued but not presented for payment Rs.

12,000. Cheques deposited but not cleared Rs. 20,000 Profit on deposit was credited by bank but not debited in

bank book Rs. 2,000. A customer paid into bank directly Rs. 15,000 but the

same was not recorded in bank book. Other receipts in bank that were not recorded in bank

book Rs. 8,000.

Financial Accounting

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Lecture – 23Solution

Nasir and Co.

Balance as per Bank Book 63,000Add Un presented cheques 12,000Less Un credited cheques (20,000)Add Profit received 2,000Add amount deposited by customer 15,000Add other receipts in bank 8,000Balance as per bank statement 80,000

Financial Accounting

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Lecture – 23Solution

Nasir and Co.

Balance as per Bank Statement 80,000Less Un presented cheques (12,000)Add Un credited cheques 20,000Less Interest received (2,000)Less amount deposited by customer (15,000)Less other receipts in bank (8,000)Balance as per bank book 63,000