Question

If we start the preparation of Bank Reconciliation Statement with balance as per Cash Book what effect does the following have in it? (i) Interest allowed by Bank (ii) Dividends on share collected by Bank​

Answer 1

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Explanation:

(i) Interest allowed by bank:

When a bank charges interest it deducts the amount in the bank balance. As the entry is not made in the cash book so we need to deduct the amount in the cash book to reconcile the balance.

(ii) Dividend on share collected by the bank :

When a bank collect dividend, as a result of this the amount in the bank increases. As no entry is made in the cash book so we need to add the amount in the cash book to reconcile the balance.