3. Contents
• Definition of bank reconciliation statement
• Cash book VS bank statement
• The nature of cash book and bank statement
• Features of bank reconciliation statement
• Importance of bank reconciliation statement
• Causes of differences in cash book and bank statement
• Sample of bank reconciliation
• Two example of bank reconciliation
5. What are the differences between Cash
Book and Bank Statement?
6. Cash Book Vs Bank Statement
Cash Book
1. It is written by the depositor.
2. Money deposited is recorded on
the debit side and money
withdrawn on credit side
3. Its debit balance shows cash at
bank and credit balance shows
bank overdraft.
Bank Statement
1. It is written by the bank but
remains in the depositor's
possession.
2. Money deposited is entered on the
credit side and withdrawn on the
debit side.
3. Its debit balance shows bank
overdraft and credit balance shows
cash at bank.
7. The nature of the cash book and bank
statement
•The balance in the cash book is an asset to the company,
therefore:
Cash Book
A debit represents an
increase
A credit represents an
decrease
8. •The balance as per the bank statement is liability to
the bank, therefore:
Bank Statement
Dr. Cr. Balance
Represents decrease Represents increase Represents the
amount owed to the
clients
9. 1. It is just a statement not an account
2. It is not a part of journal and ledger
3. It is prepared for a particular day, not for a period
4. It is prepared at regular intervals, say every month, three month, 6
month etc according to the requirement of the company
5. It is prepared by a person who has an account with a bank, A bank
does not prepare it.
6. It explain the causes of disagreement between bank statement and
cash book.
Features of Bank Reconciliation Statement
10. 1. It assists to cause of differences between cash and passbook balances.
2. It assists to calculate the actual bank balances.
3. It assists to find out mistakes committed in cashbook and passbook
4. It shows the transaction not recorded either by cash book or pass
book
5. It assists to maintain healthy relation between banks its customers
Importance of Bank Reconciliation
Statement
11. Causes of Differences in Cash Book
and Bank Statement
1. Time gap in recording transactions or
2. Errors committed in recording transactions
12. Differences caused by the time gap
Deposit outstanding:
-Cash receipts recorded by the depositor by not included in bank statement
Cheques outstanding:
-Cheques issued by the firm that have not yet presented to its bank for payment
Collection by bank:
-Money received from customers directly through the banking system
Non-sufficient fund(nsf):
-Cheques deposited but dishonored by the bank
Bank profit/dividends:
-Profit or dividends received for deposits or fixed deposits
Bank charges:
-Charges made by the bank to the firm for banking services used but not included in cash
book
13. Differences caused by Errors committed
Errors committed by the company
I. Cheques issued to some creditors but omitted to be recorded in the
Cash book or recorded twice
II. Cheques deposited into the bank omitted to be entered in the Cash
book or recorded twice
III. Error in totaling or balancing the bank column of the Cash book
Errors committed by bank
Something bank records a wrong entry in the customer’s account
which causes a differences in two balances.
14. Sample of Bank Reconciliation Statement
‘X’ Company
Bank Reconciliation Statement
Bank Balance $ Book Balance $
Bank balance
Add:
Deposit outstanding
Error that understated by
bank balance
Less:
Cheques outstanding
Error that overstated by
bank balance
Correct cash balance
***
***
***
(***)
(***)
***
Book balance
Add:
Collection by bank
Error that understated
by book balance
Less:
NSF
Bank charges
Error that overstated by
book balance
Correct cash balance
***
***
***
(***)
(***)
(***)
***
15. Example 1
The books of SAMSUNG company showed a balance of tk. 16,690 on November 30, 2016. the
bank statement as on that date showed a balance of tk. 18,500. on comparing bank statement
with Cash records, the following facts were reveals:
I. A cheques for tk. 2,000 drawn by Symphony company was wrongly charged by the bank to the
account of SAMSUNG company.
II. A non-interest bearing note receivable for tk. 1,890 owned by the SAMSUNG company for the
bank for collection, had been collected on November 28 ,2016 and the bank had made a charge
of tk. 30 for collection.
III. A cheque for amount of tk. 4,000 has been returned for insufficient fund. No entry was made in
cash records.
IV. A cheque for tk. 2,425 issued on November 22 in payments for office equipment has been
erroneously entered in the according record as tk. 3,425.
V. A deposit of tk. 1,050 was transit , it has been mailed to the bank on November 30.
VI. Cheques outstanding on November 30 2016 were tk.6,000
Required:
Prepare bank reconciliation statement on November 30, 2016.
Give necessary journal entries to rectify the cash book.
16. SAMSUNG Company
Bank Reconciliation Statement
November 30, 2016
Bank Balance TK. Book Balance Tk.
Bank balance
Add:
Error that understated by
bank balance (i)
Deposit outstanding (v)
Less:
Cheques outstanding (vi)
Correct cash balance
18,500
2,000
1,050
(6,000)
15,550
Book balance
Add:
Notes collection by bank (ii)
Error that understated by
book balance (iv)
Less:
Service charge (ii)
Non sufficient fund(NSF) (iii)
Correct cash balance
16,690
1,890
1,000
(30)
(4,000)
15,550
17. SAMSUNG Company
Journal
Date Explanation REF Debit
(Tk.)
Credit
(Tk.)
Cash
Notes receivable
(Recorded Notes collection by bank)
Cash
Accounts payable
(Recorded error that understated by
book balance)
Service charge
Cash
(Recorded service charge)
Accounts receivable
Cash
(Recorded NSF)
1,890
1,000
30
4,000
18,90
1,000
30
4,000
18. EXAMPLE 2
The May 31 , 2016 bank statement of Pran Food Ltd. Has just arrived from Asia bank. The following
information is available for reconciling the bank statement of apex food ltd. On May 31,2016
I. Bank balance is tk. 15000 on May 31, 2016 and Pran’s cash account shows a balance of tk. 20000 on
may 31, 2016.
II. Notes collected by the bank tk. 6,000 and interest on bank deposit tk.1000 were not recorded in cash
book.
III. Share refund warrant for tk.7000 has sent to the bank for which has no information had been reached to
the company before May 31.
IV. Cash receipts not yet deposited tk.6000
V. Bank is paying the tk. 1000 to Rupali bank at the end of each month as per instruction of account holder,
had not been entered in cash book.
VI. A lodgment of tk. 5000 on May 30 had not been credited by the bank.
VII. Pran Food Ltd. had brought down his opening cash book balance of tk. 5000 as a debit balance instead
of as a credit balance.
VIII. Cheques outstanding as of May 31 were tk.3000.
Required:
Prepare bank reconciliation statement on May 31, 2016.
Give necessary journal entries to rectify the cash book.
19. Pran Food Ltd.
Bank Reconciliation Statement
May 31,2016
Bank Balance Tk. Book Balance Tk.
Bank balance (i)
Add:
Deposit Outstanding (iv)
Lodgment (vi)
Less:
Cheques outstanding (viii)
Correct cash balance
15,000
6,000
5,000
(3,000)
23,000
Book balance (i)
Add:
Notes collection by bank (ii)
Interest on bank deposit (ii)
Share refund warrant (iii)
Less:
Monthly Paying (v)
Error that overstated by book
balance (5000*2) (vii)
Correct cash balance
20,000
6,000
1,000
7,000
(1,000)
(10,000)
23,000
20. Date Explanation REF Debit(Tk.) Credit(Tk.)
Cash
Notes receivable
(Recorded notes collection by bank)
Cash
Interest revenue
(Recorded interest on bank deposit)
Cash
Bank
(Recorded share refund warrant)
Accounts payable
Cash
(Recorded monthly payment)
6,000
1,000
7,000
1,000
6,000
1,000
7,000
1,000
Pran Food Ltd.
Journal
