Question

explain how bank reconciliation statement is prepared with an adjusted balance of cash book

Answer 1

Solution :-

Usually, when a trader looks into his cash (bank column) book and pass book, there may be differences. At the end of financial, it is necessary to show the correct financial statements. Thus, it is implied that the entries ought to be made, should be made. Thus, the trader tries to adjust his cash book by incorporating the entries or items like - Bank Charges, Interest, direct deposit etc in pass book.

He will also try to rectify the errors in his cash book, if any. With these adjustments, reconciliation is done with the remaining items, say; cheques issued but not presented, cheques deposited but not credited, pass book error etc. The following example will clarify the adjustment.

From the following particulars, ascertain the Bank Balance as per Pass Book as on 31 st march 2017.

1) The bank balance as cash book on the date was Rs. 11500.

2) Cheques issued but not cashed before the date amounted to Rs. 1750.

3) Cheques paid into bank, but cleared before March amounted to Rs. 2150

4) Interest on investments collected by the bank but not entered in the cash book amounted to Rs. 275

5) Local charges paid in but not entered in the cash book amounted to Rs. 300

6) Bank charges debited in the pass book amounted to Rs. 25

With adjustments in Cash Book.

Dr.                                  Cash Book (Bank Column)                                 Cr.
____________________________________________________________
Mar 31 To Balance b/d    11500       Mar 31     By Bank Charges            25   

 "     "    To Interest On Investment     "     "      By Balance c/d           12050

                                           275

 "     "    To Cheques Omitted
  
                                           300
_____________________________________________________________

                                       12075                                                            12075
_____________________________________________________________

Bank Reconciliation Statement will then appear as follows.

                              Bank Reconciliation Statement  
                                         as on 31st March
_____________________________________________________________
                                                                                      Rs.                      Rs.

_____________________________________________________________

Bank balance as cash book                                                                 12050

Add:  Cheques issued but not presented                    1750             (+) 1750

_____________________________________________________________
                                                                                                              13800

Less: Cheques paid in but not collected                     2150               (-)  2150

_____________________________________________________________ 
                         Bank Balance as per Pass Book                                11650
_____________________________________________________________

Answer 2

Bank reconciliation statement is prepared to maintain the difference between bank statement balance and balance in depositor’s accounting record.

In this method, a bank reconciliation statement is prepared taking balances of bank statement and the account holders cash book simultaneously in statement form. The transactions which initially get recorded in the depositor's cash book, but not recorded on the bank statement , that amount get adjusted with the balance of bank statement.

I have attached a Bank Reconciliation Statement Template image hope it will help you to understand.