Question

What is the meaning of interest on investment collected by bank

Answer 1

Answer:

Usually, when a trader looks into his Cash (Bank column) Book and the Pass Book, there may be differences. At the end of financial year, 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 error in his Cash Book, if any. With these adjustments, reconcili­ation is done with the remaining items, say; cheques issued but un-presented, cheques deposited but un-credited, Pass Book error, etc. The following example will clarify the adjustment.

Explanation:

Illustration 1:

From the following particulars, ascertain the Bank balance as per Pass Book as on 31st December.

1. The Bank balance as per Cash Book on the date was Rs 11,500.

2. Cheques issued but not cashed before that date amounted to Rs 1,750.

3. Cheques paid into Bank, but not cleared before December amounted to Rs 2,150.

4. Interest on Investments collected by the Bank but not entered in the Cash Book amounted to Rs 275.

5. Local cheque paid in but not entered in the Cash Book Rs 300.

6. Bank Charges debited in the Pass Book Rs 25.