Prepare a bank reconciliation statement. 1Bank overdraft as per passbo...
Bank Reconciliation Statement
Step 1: Compare Bank Statement with Cash Book
- Bank overdraft as per passbook: 22,000
- Cheques deposited into bank but no entry was made in cash: 3,700
- Cheque received neither recorded in cash book nor sent to bank: 7,500
- Insurance premium paid directly by bank as per instructions: 700
- Bank charges entered twice in cash book: 200
- Cheque received from customer debited in the bank column of cash book but omitted to bank: 5,000
Step 2: Adjust the Cash Book
- Add the cheques deposited but not recorded in cash: 3,700
- Deduct the cheque received but not recorded in cash or sent to bank: 7,500
- Deduct the insurance premium paid directly by bank: 700
- Deduct the bank charges entered twice in cash book: 200
- Add the cheque received from customer debited in the bank column of cash book but omitted to bank: 5,000
- Total adjustments: - 200
Step 3: Prepare the Bank Reconciliation Statement
- Bank overdraft as per passbook: 22,000
- Add: Unrecorded deposits: 3,700
- Deduct: Unpresented cheques: 7,500
- Deduct: Insurance premium paid directly by bank: 700
- Deduct: Bank charges entered twice in cash book: 200
- Add: Omitted cheque received from customer: 5,000
- Adjusted bank balance: 22,300
Step 4: Explain the Bank Reconciliation Statement
The bank reconciliation statement is a document that compares the bank statement with the cash book to identify any differences. In this case, the bank statement shows an overdraft of 22,000 while the cash book shows a different balance due to various adjustments.
The adjustments made to the cash book include adding the cheques deposited but not recorded in cash, deducting the cheque received but not recorded in cash or sent to the bank, deducting the insurance premium paid directly by the bank, deducting the bank charges entered twice in the cash book, and adding the omitted cheque received from the customer.
After making these adjustments, the adjusted bank balance is 22,300 which is higher than the bank overdraft as per the passbook. This difference can be explained by the timing of certain transactions or errors made in recording them. The bank reconciliation statement helps to ensure that the cash book and bank statement are accurate and up to date.