1

Cash Book ( Bank Column Only )

2006 $ 2006 $

Aug1 Balance b/f 40 Aug11 G.Wong 25Aug10 K.Chan 60 Aug23 H.Chik 45

Aug31 Balance c/f 30100 100

Bank Statement

Aug5 Balance b/f 40 Cr.

2006 Dr. Cr. Balance$ $ $

Aug11 G.Wong 25Aug 10 K.Chan 60 100 Cr.

Example 1~

75 Cr.

2

1. Should the ending balance of the Cash Book and Bank Statement be the same?

2. Why they should be the same?

3. Can you tell me why there is a difference between their ending balances?

3

• Timing differencesE.g. A receipt of $50 from A.Lee on Aug 28 were credited by the bank on Sept 3

• Omissions and Errors

E.g. A payment of electricity fee by the bank of $300 was omitted in the Cash Book

4

( 1 ) Unpresented Cheques• Cheques issued by the firm not presented for payment by the bank.

Cash Book (Bank) 2005 $Dec 31 Furniture 100Dec 31 Furniture 100

Bank Statement

2006 Dr. Cr. Balance$ $ $

Jan 10 Furniture 100 100 Dr

E.g

5

• Deposits entered into the Cash Book but not yet appeared on Bank Statement

Cash Book (Bank)

2005 $Dec 30 Sales 100

Bank Statement

2006 Dr. Cr. Balance$ $ $

Jan 2 Sales 100 100 Cr

E.g

6

• Payments made directly through the bank

Cash Book (Bank) 2006 $Jan 3 Rates 700

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 20 Rates 700 700 Dr

E.g

7

•Charges for banking services made by the bank for •the company

Cash Book (Bank)2006 $Jan 3 Bank Charges 20

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 25 Bank Charges 20 20 Dr

E.g

8

• Standing instructions from the firm to make regular payments by the bank

Cash Book (Bank) 2006 $Jan 2 subscriptions 300

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 10 subscription 300 300 Dr

E.g

9

•Collection from customers made direct to the bank •through the banking system

Cash Book (Bank)

2006 $Jan 2 subscriptions 400

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 17 subscription 400 400 Cr

E.g

10

•Cheque deposited into the bank but returned by the bank marked ‘refer to drawer’ ( i.e. the drawer fails to pay )

Cash Book (Bank)

2005 $Dec 7 A.Chan 500

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 9 A.Chan 500 500 Cr

E.g

Dec 11 A.Chan 500 0 (Refer to drawer)

11

•Interest received from the bank for deposits or fixed •deposits into the bank

Cash Book (Bank)

2006 $ Jan 2 Interest received 10

Bank Statement

2005 Dr. Cr. Balance$ $ $

Dec 20 Interest received 10 10 Cr

E.g

12

• Explain the reasons for differences

• Identify errors and omissions in the Cash Book and the Bank Statement

•Make corrections

13

Example 2 Cash Book ( Bank Column Only )

20062006 $ 2006 $

Aug1 Balance b/f 40 Aug11 G.Wong 25Aug10 K.Chan 60 Aug23 H.Chik 45

Aug31 Balance c/f 30100 100

Bank Statement

Aug 1 Balance b/f 40 Cr.

2006 Dr. Cr. Balance$ $ $

Aug 11 G.Wong 25 75 Cr.Aug 10 K.Chan 60 100 Cr.

14

Bank Reconciliation Statement as at 31 August 2006

Unpresented cheque : H.Chik 45

Balance in hand as per bank statement 75

Balance in hand as per Cash Book 30

Add

$

Bank Reconciliation Statement as at 31 August 2006

Less: Unpresented cheque :H.Chik 45

Balance in hand as per Cash Book 30

$

Balance in hand as per Bank Statement 75

15

2008 $ 2008 $

Dec26 Balance b/f 500 Dec27 Y. Chan 100Dec28 G.Poon 70 Dec29 C.Cheung 25Dec 31 A.Tang 230 Dec31 Balance c/f 675

800 800

Bank Statement

Dec 26 Balance b/f 500 Cr.

2008 Dr. Cr. Balance$ $ $

Dec 30 Y. Chan 100 470 Cr.Dec 29 Cheque 70 570 Cr.

Exercise1 Cash Book

Credit Transfer: L.Chung 60 530 Cr.Bank Charges 20 510 Cr.

16

Example 3Cash Book ( Bank Column Only )

2006 $ 2006 $Aug27 Balance b/f 400 Aug28 W.Wong 55Aug29 T.Pong 50 Aug30 A.Kong 20Aug30 G.Lee 110 Aug31 Balance c/f 485

560 560

Bank Statement

Aug 27 Balance b/f 400 Cr.

2006 Dr. Cr. Balance$ $ $

Aug 30 W.Wong 55 395 Cr.Aug 29 Cheque 50 450 Cr.

Aug 30 Credit transfer: G.Lau 60 455 Cr.Aug 30 Bank Charges 40 415 Cr.

17

What is the amount difference between the Cash Book and the Bank Statement?

Answer : $485-$415=$70

18

Credit Transfer

Bank interest Debit Cash Book(since not yet entered in Cash Book)

Standing Order/ Direct Debit

Bank Charges

Dishonoured Cheques

Credit Cash Book(since not yet

entered in Cash Book)

19

Cash Book

2006 $ 2006 $

Aug 31 Balance b/f 485 Aug 31 Bank charges 40

Aug 31 Credit transfer 60 Aug 31 Balance c/f 505

545 545

20

Bank Reconciliation Statement as at 31 August 2006

$

Balance in hand as per Cash Book 505

Add Unpresented cheque :A.Kong 20

525

Less Uncreditd items 110

Balance in hand as per bank statement 415

21

Bank Reconciliation Statement as at 31 August 2006

$ $

Balance in hand as per Cash Book 485

Add Unpresented cheque :A.Kong 20

Credit transfer : G.Lam 60 80

565 Less

Uncredited items : G.Lee 110

Bank charges 40 150Balance in hand as per Bank Statement 415

22

Bank Reconciliation Statement as at 31 August 2006

$ $

Balance in hand as per Bank Statement 415

AddUncredited items :G.Lee 110

Bank charges 40 150 565

Less Unpresented cheque :A.Kong 20

Credit transfer :A.Lam 60 80

Balance in hand as per Cash Book 485

23

Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank

balance Statement Book Statement balance balance Balance

Unpresented1)

cheque十 一

2)Uncredited

items一

3)Direct debits

十十

一 十一

一

24

Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank

balance Book Statement

4)Bank

charges

5) Standing

orders

一 一

一 一

十

十6)Credit

transfer/ direct

credits

十 十 一

balance balance

25

Dishonoured cheque

8) Interest

allowed by the bank

Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank

balance balance balance

一 一

一

十

十十

7)

26

Bank Overdrafts(Shown by a credit Balance in the Cash Book)

Cash Book

2006 $Nov1 Balance b/f 300

Bank overdraft

Bank Statement

2006 Dr Cr Balance$ $ $

Nov1 Balance b/f 300 O/D

27

Example Cash Book2007 $ 2007 $Dec 4 A. Ko X 290 Dec 24 N. Ng X 110Dec 29 M.Ming 110Dec 31 B.Tam 103Dec 31 Balance c/d 199

Dec 1 Balance b/f 522Dec 5 K.Wong 120

Dec 23 D.Fung 50 Dec 29 A.Co 70Dec 31 Bank Charges 50

812 812

Bank Statement

2007 Dr. Cr. Balance

Dec 1 Balance b/f 522 O/DDec 5 Cheque 290 X 232 O/D

K.Wong 120 352 O/DDec 24 Cheque 110 X 242 O/DDec 29 M.Ming: Credit Transfer 110 132 O/DDec 29 A.Co. 70 202 O/DDec 31 Bank Charges 50 252 O/D

$ $ $

28

Answers

Bank Reconciliation Statement as at 31 December 2007

Overdraft as per Cash Book 199$

LessBank Lodgement not yet entered on Bank Statement 103

302

Add

Unpresented Cheque 50

252