By S.K Chik

Introduction

• At each given date, our banker should send us a statement which shows the details of our bank transactions during a particular period and the balance at that date. We call this statement the “bank statement”

• Theoretically, our company’s bank account in the cash book column should have the same transactions and balance as recorded by the bank statement.

• The only difference is that the former is prepared by our firm while the latter is done by the banker

• However, in practice, the balance from the bank statement seldom agrees with the balance from the bank account in the cash book.

Reasons for differences

1. Bank interest and commissionThe banker calculates these charges, the amou

nt will first appear on the bank statement and cannot be entered into the cash book until the statement is received.

2. Uncredited ChequesSome cheques that we have received but not y

et deposited or deposited but not yet credited on the bank statement because the cheques have not been ”cleared”

3. Unpresented ChequesCheques issued sent to creditors have been recorded in the cash book but they have not been presented to the bank for payment, so the corresponding entry in the bank statement may not appear until several days later.

4. Autopay – Standing Orders and Direct debitsThe banker pays regular amounts on behalf of our company, this amount paid will first appear on the bank statement at the appropriate date, but may not have been entered in the cash book.

5.Credit transferSometimes debtors may not send us the cheques for settlement but directly deposit money into our bank account. (e.g. EPS) This amount received will first appear on the bank statement and cannot be entered into the cash book until the bank statement is received.

6. Dishonored/ Returned Cheques

7. Errors made by the banker or by the company

Adjustments

• We should adjust the balance of cash book in order to agree the balance of bank statement

• The difference that cash book has not been entered the transactions of Bank interest, Standing orders, Direct debits, Credit transfer and dishonored Cheques should be adjusted in Cash book

ITEMS

ENTRIES ALREADY MADE ON

CORRECTION REQUIRED ON CASH BOOK

CASH BOOK BANK STATEMENT

1. Unpresented Cheque

Credited Not yet entered

None

2. Uncredited cheque

Debited Not yet entered

None

3. Credit transfer

Not yet entered

Credited debit

4. Standing Order

Not yet entered

Debited Credit

5. Bank Charges

Not yet entered

Debited Credit

6. Dishonored cheque

Debited returned Credit

20X6 $

Jan 30 Mr. A 50

31 Bal c/ d 700

750

20X6 $

Jan 25 Balance b/ f 100

28 Sales 200

31 Sales 500

750

Feb 1 Balance b/ d 700

Cash Book (Bank)

Date

20X6

Jan 25

26

28

30

31

Particulars

Balance b/ f

Cheque #901

Cash deposit (sales)

Cash deposit (Mr. B)

Standing order - rent

Withdrawals (Dr.)

$

30

40

Deposits (Cr.)

$

20

150

Balance

$

130 (Cr.)

100 (Cr.)

120 (Cr.)

270 (Cr.)

230 (Cr.)

Hong Kong Bank LTD.

Gradeplus Co.

Bank Statement

20X6 $

Jan 30 Mr. A 50

31 Bal c/ d 700

750

20X6 $

Jan 25 Balance b/ f 100

28 Sales 200

31 Sales 500

750

Feb 1 Balance b/ d 700

Cash Book (Bank)

Date

20X6

Jan 25

26

28

30

31

Particulars

Balance b/ f

Cheque #901

Cash deposit (sales)

Cash deposit (Mr. B)

Standing order - rent

Withdrawals (Dr.)

$

30

40

Deposits (Cr.)

$

20

150

Balance

$

130 (Cr.)

100 (Cr.)

120 (Cr.)

270 (Cr.)

230 (Cr.)

Hong Kong Bank LTD.

Gradeplus Co.

Bank Statement

Unpresented Cheque (adju

sted)

Overstated $180

Unpresented Cheque

Credit transfer

Uncredited Cheque

Standing Order

Understated balance of $50

20X6 $

Jan 31 Standing Order 40

31 Bal c/ d 860

900

20X6 $

Jan 31 Balance b/ f 700

31 Credit transfer 150

31 Understated balance 50

900

Feb 1 Balance b/ d 860

Cash Book (Bank)

Adjustments

Bank Reconciliation Statement

Balance as per cash book

Add: Unpresented Cheque

Less: Uncredited Cheque

Bank error (understated deposit)

Balance as per bank statement

$

50

500

180

$

860

910

(680)

230

Bank Reconciliation Statement

as at 31 January 20X6

Balance as per bank statement

Add: Uncredited Cheque

Bank error (understated deposit)

Less: Unpresenited Cheque

Balance as per Cash Book

$

500

180

50

$

230

680

910

(50)

860

Bank Reconciliation Statement

as at 31 January 20X6

Instead of commencing with the cash book balance, the bank reconciliation statement can commence with the bank statement balance and end with cash book balance as follows:

At the close of business on 28 February 19X9 the cash book of Mr. Chong showed a balance of $625 in his bank. The figure differed from the bank balance as shown on his bank statement. The following matters account for the difference:

(a) On 28 February 19X9 one of his debtors had paid direct to Mr. Chong’s banking account the sum of $42. This transaction had not been entered in the cash book.

(b) During February 19X9 the bank had allowed Mr. Chong interest amounting to $54 but this had not yet appeared in the cash book.

(c) Certain cheques drawn by Mr. Chong during February 19X9 had not been presented for payment by the close of business on 28 February 19X9. These were for $21, $17. $57 and $61.

(d) A standing order for $75 being one quarter’s rent had been paid by the bank on Mr. Chong’s behalf but this had not yet been entered in the cash book.

(e) During February 19X9, Mr. Chong had paid into his banking account a cheque for $44 which he had received from a debtor’s bank. The appropriate entry appeared on the bank statement but not in Mr. Chong’s cash book.

Example:

• Write up the cash book starting with balance of $625 and draw up the bank statement but not in Mr. Chong’s cash book.

Required: