Question

If bank reconciliation statement is started with Unfavourable balance as per Cash book, how will bank charges levied by bank will be treated? Please state whether it will be added or subtracted .

Answer 1

Explanation:

Interest charged by bank is an expense for the business. It is credited in the cash book when it is paid by the business, thereby reducing the balance in the cash book (bank column). So, when overdraft as per pass book is the starting point for preparing bank reconciliation statement, interest charged by bank will be deducted to arrive at the balance as per cash book at the end.