How To Drown Up A Bank Reconcilation Statement

How To Drown Up  A Bank Reconciliation Statement

• Compare the two accounts and note all the items of disagreement.
• Adjust all the items in the cash book in usual manner, which have not been recorded in its because of our lack of knowledge of what the bank have done.
• reconcile the other items in a reasonable statement, starting with one balance and finishing with the other.

Different Causes Of Disagreement:

Cheques Issued Or Drawn To Creditors But Not Paid By Bank:

Cash Book will show the less balance and Pass Book will show more.

When a cheque is issued to a creditor, it is recorded in the Cash Book (Bank credit column) on the same date, but bank will record it on the date when it is paid. In most of the cases a cheque cannot be presented by the creditor on the date on which it is drawn. So long the bank cannot collect the amount, the Cash Book balance and the Pass Book balance will disagree. Suppose on 10.1.2015, we receive a cheque of Rs. 4000 from a debtor Mr. A and deposits it into the bank for collection on the same date after recording it in the Cash Book .But the bank has credited our account with the same amount of the cheque when it is collected by it on 14.1.2005. Thus the Cash Book balance will be Rs. 4000 more and the Pass Book balance Rs. 4000 less.

Amount Deposited Directly Into The Bank By The Bank 

Sometimes the debtors deposit the amount directly to our bank A/c instead of paying cash to us. In such a case the bank will transfer the amount to our account (gives credit to our account) and sends us an intimation of this. But usually, there is some delay in receiving this intimation from the bank. So long the intimation is not received by us, the Cash Book balance and Pass Book balance will disagree. For this, the Cash Book will show less balance and Pass Book will show more balance.

Dividend Etc. Collected By The Bank

Sometimes the bank collects and credits our with dividend on shares, interest on Government securities etc. as per our instructions and send an intimation to us. But it takes a few days to receive this information from the bank and we record it into the Cash Book on the date of receipt of this intimation. For this the Cash Book will show less balance and Pass Book will show more balance.

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Interest On Deposits

The bank allows us interest on our deposit and credit the of interest to our account and sends intimation to us on receipt of the intimation, we record it in the Cash Book. So  the information is not received by us, the Cash Book balance and the Pass Book balance will not agree. For this, Cash Book will show less balance and Pass Book will show more balance.

Insurance Premium Etc. Paid By The Bank

Sometimes the bank pays insurance premium, factory rent, interest on debenture, trade subscription  etc. On our behalf as per standing order .The bank credit our account and send intimation to us. On receipt of intimation from the bank, we record it in the Cash Book. For this Cash Book will show more balance and Pass Book will show less balance. 

The Bank Charges Etc. And Interest On Overdraft 

Our account is debited with the  bank charges and interest on overdraft and the intimation is sent to us by the bank. On receiving the intimation from the bank, we record them in the Cash Book.  For this Cash Book will show more balance and Pass Book will show less balance. 

Errors And Omissions

The Cash Book balance and the Pass Book balance can also disagree if there is any error or mistake in the Cash Book or in the Pass Book. A few examples of such errors and omission,  For this Cash Book will show more balance and Pass Book will show less balance. 

(a) We have received a cheque from a debtor and recorded it in the Cash Book (debited in the Cash Book) but have forgotten to sent it to the bank for collection. For such omission,  Cash Book will show more balance and Pass Book will show less balance.  

(b) We have received a cheque from a debtor and deposited into the bank for collection but have forgotten to record it in the Cash Book, or wrongly recorded in the 'cash column' of the Cash Book or in the Bank column of Cash Book on 'credit side' instead of debit side. For such errors,Cash Book will show less balance and Pass Book will show more balance.

(c) We have received a cheque from a debtor, and deposited it into the bank and recorded it in the Cash Book, but  the bank has forgotten to record it in the Pass Book or wrongly recorded on the debit side (withdrawl side ) of the Pass Book  For such omission,  Cash Book will show more balance and Pass Book will show less balance.  

(d) We have issued a cheque to our creditors, but forgotten to record in the Cash Book or wrongly recorded into the Cash Column (credit column) of the Cash Book or in the Bank Column of the Cash Book on the debit side . For such omission,  Cash Book will show more balance and Pass Book will show less balance.  

(e) We have issued a cheque to our creditors and the bank has paid cheque but has forgotten to record it in the Pass Book . For this ,Cash Book will show less balance and Pass Book will show more balance.

(f) There may be a mistake in casting (Totaling) the Cash Book. Suppose the debit side of the Cash Book is overcast by Rs. 10 (Totaling is made more by Rs.100). For this Cash Book will show more balance and Pass Book will show less balance.  

(g) On the other hand, if the credit side of the Cash Book is overcast, for this , Cash Book will show less balance and Pass Book will show more balance.

(h) If the bank has wrongly debited our account (Pass Book) , for this  Cash Book will show more balance and Pass Book will show less balance.  

(i) If the bank has wrongly credited our account (Pass Book) , for this, Cash Book will show less balance and Pass Book will show more balance.