The amount of rs. 45 will be credited to cash column or it will be minus while preparing bank reconciliation statement

Bank Reconciliation Statement

A bank reconciliation statement is a document that compares the bank statement balance with the cash book balance to identify any discrepancies or errors. It helps in ensuring the accuracy and completeness of the financial records.

Reason for Difference in Cash Column

In this case, the cheque issued for rupees 250 was recorded as 205 in the cash column. This discrepancy could have occurred due to various reasons, such as:

1. Error in recording: It is possible that the person responsible for recording the transaction made a mistake while entering the amount in the cash column.

2. Transposition error: A transposition error occurs when the digits in the amount are accidentally reversed. For example, instead of recording 250, the amount was recorded as 205.

3. Misinterpretation of the cheque: The person recording the transaction might have misread or misinterpreted the cheque, leading to the incorrect recording in the cash column.

Preparing the Bank Reconciliation Statement

To rectify the error and prepare the bank reconciliation statement, follow these steps:

1. Gather the necessary documents: Collect the bank statement, cash book, and any relevant supporting documents such as deposit slips, cheque copies, and bank receipts.

2. Compare the bank statement and cash book: Start by comparing the opening balances of the bank statement and the cash book. Then, go through each transaction and identify any differences.

3. Identify outstanding cheques: Check if there are any cheques issued but not yet presented for payment. In this case, the cheque for rupees 250 was recorded as 205, so it is considered an outstanding cheque.

4. Adjust the cash book balance: Add the amount of the outstanding cheque (250) to the cash book balance. This will reflect the correct cash position.

5. Compare deposits and withdrawals: Compare the deposits and withdrawals recorded in the cash book with the bank statement. Look for any discrepancies or missing transactions.

6. Reconcile the bank statement balance: Adjust the bank statement balance by adding or subtracting any outstanding deposits or withdrawals. This should result in a reconciled bank statement balance.

7. Prepare the bank reconciliation statement: Finally, prepare the bank reconciliation statement, which shows the differences between the cash book balance and the bank statement balance. It should include the outstanding cheque as a reconciling item.

Conclusion

In conclusion, the discrepancy between the cheque issued for rupees 250 and the recorded amount of 205 in the cash column can be rectified by preparing a bank reconciliation statement. This statement helps in identifying and resolving any differences between the bank statement and the cash book balances. By following the steps mentioned above, the error can be corrected, and the accurate cash position can be determined.