Worksheet Solutions: Bank Reconciliation Statement | Accountancy Class 11 - Commerce PDF Download

Q1: State the need for the preparation of a bank reconciliation statement.
Ans: Preparing a bank reconciliation statement is necessary for:

• It helps in identifying and explaining the differences between the cash book and the passbook, so that both records agree.
• It enables the business to determine the true bank balance available at any given date.
• It helps detect errors made either by the firm or by the bank, so corrections can be made promptly.
• It acts as a control measure to prevent and detect fraud or embezzlement in bank transactions.
• It provides the basis for preparing a revised or amended cash book that reflects all bank-related entries correctly.

Q2: What is a bank overdraft?
Ans: A bank overdraft arises when withdrawals from a bank account exceed the available balance. It represents a liability of the account holder to the bank. In practice, the bank allows the account to go into a negative balance up to an agreed limit; interest is usually charged on the overdrawn amount.

Q3: Briefly explain the statement ‘wrongly debited by the bank’ with the help of an example.
Ans: The phrase wrongly debited by the bank means the bank has reduced the customer’s account for an amount that should not have been charged. For example, Rajesh’s account was debited with an overdraft charge of ₹5,000 even though his account had a sufficient balance. This can happen because of an incorrect entry by the bank cashier. The correct action is to contact the bank, present supporting records (cash book, passbook, vouchers) and request a reversal of the wrong debit.

Q4: State the causes of differences that occurred due to time lag.
Ans: The following are the causes of differences that arise because of timing (time lag) between when transactions are recorded in the cash book and when they appear in the passbook:

• Cheques issued by the firm but not yet presented to the bank for payment.
• Cheques are deposited into the bank but have not yet been cleared or realised by the bank.
• Receipts collected directly by the bank (direct credits) that have not been recorded in the cash book.
• Payments made directly by the bank on behalf of the customer (direct debits) have not yet been entered in the cash book.
• Interest, dividends or other bank credits/debits recorded by the bank but not yet entered in the cash book.
• Cheques deposited or bills discounted that are subsequently dishonoured; the dishonour may appear later in the passbook.

Q5: Briefly explain the term favourable balance as per the cash book.
Ans: When the total of the debit column of the cash book (receipts) is more than the total of the credit column (payments), the cash book shows a debit balance or favourable balance. This balance is an asset of the account holder and means that deposits exceed withdrawals.

Q6: Enumerate the steps to ascertain the correct cash book balance.
Ans: The difference between the cash book and the passbook can arise because some transactions recorded in the passbook are not yet in the cash book. To arrive at the correct cash book balance, do the following:

• Note the bank balance as per the cash book.
• Correct any errors found in the cash book entries.
• Record transactions that appear only in the passbook: if the passbook shows a credit (the bank has credited the account), enter it on the debit side of the cash book; if the passbook shows a debit (the bank has debited the account), enter it on the credit side of the cash book.
• Recompute the totals of the cash book after these additions and corrections.
• Use the amended cash book balance as the basis to prepare the Bank Reconciliation Statement.

Q7: Explain the process of preparing a bank reconciliation statement with an amended cash balance.
Ans: The process involves identifying differences between the cash book and the passbook and then revising the cash book so both records agree. The main steps are:

• Start with the bank balance as per the cash book.
• Make corrections for any errors found in the cash book entries.
• Enter transactions that appear only in the passbook: add bank credits not in the cash book, and record bank debits (charges, direct payments) on the cash book credit side.
• After posting these, compute the amended cash balance.
• Prepare the bank reconciliation statement using the amended cash balance to explain any remaining differences with the passbook balance.

Q8: What is a bank reconciliation statement? Why is it prepared?
Ans: A Bank Reconciliation Statement is a statement prepared to identify and explain the differences between the balance shown by the firm’s cash book and the balance shown by the bank’s passbook. It is prepared for the following reasons:

• To verify whether the balance shown by the cash book is correct.
• To locate and rectify errors in the cash book so that accurate financial statements can be prepared.
• To detect errors or unauthorised transactions made by the bank and take corrective action.
• To improve internal control by identifying missing entries, unpresented cheques, uncleared deposits and similar timing differences.
• To ensure the accuracy and completeness of records maintained by both the business and the bank.

Q9: From the following particulars, prepare a bank reconciliation statement as of March 31, 2017.
(i) Balance as per cash book ₹ 3,200
(ii) Cheque issued but not presented for payment ₹ 1,800
(iii) Cheque deposited but not collected up to March 31, 2017, ₹ 2,000
(iv) Bank charges debited by bank ₹ 150
Ans: The reconciliation statement is shown below:

Q10: On March 31 2017 the cash book showed a balance of ₹ 3,700 as cash at the bank, but the bank passbook made up to the same date showed that cheques for ₹ 700, ₹ 300, and ₹ 180 respectively had not been presented for payment, Also, cheque amounting to ₹ 1,200 deposited into the account had not been credited. Prepare a bank reconciliation statement.
Ans: The reconciliation statement is shown below:

Q11: The cash book shows a bank balance of ₹ 7,800. On comparing the cash book with the passbook the following discrepancies were noted:
(a) Cheque deposited in the bank but not credited ₹ 3,000
(b) Cheque issued but not yet present for payment ₹ 1,500
(c) Insurance premium paid by the bank ₹ 2,000
(d) Bank interest credit by the bank ₹ 400
(e) Bank charges ₹ 100
(f) Directly deposited by a customer ₹ 4,000
Ans: The bank reconciliation statement is shown below:

Q12: Bank balance of ₹ 40,000 showed in the cash book of Atul on December 31, 2016. It was found that three cheques of ₹ 2,000, ₹ 5,000, and ₹ 8,000 deposited during the month of December were not credited in the passbook till January 02, 2017. Two cheques of ₹ 7,000 and ₹ 8,000 issued on December 28, were not presented for payment till January 03, 2017. In addition to it, bank had credited Atul for ₹ 325 as interest and had debited him with ₹ 50 as bank charges for which there were no corresponding entries in the cash book.
Prepare a bank reconciliation statement as of December 31, 2016.
Ans: The bank reconciliation statement is shown below:

Q13: On comparing the cash book with the passbook of Naman it is found that on March 31, 2017, the bank balance of ₹ 40,960 shown by the cash book differs from the bank balance with regard to the following:
(a) Bank charges ₹ 100 on March 31, 2017, are not entered in the cash book.
(b) On March 21, 2017, a debtor paid ₹ 2,000 into the company’s bank in settlement of his account, but no entry was made in the cash book of the company in respect of this.
(c) Cheques totalling ₹ 12,980 were issued by the company and duly recorded in the cash book before March 31, 2017, but had not been presented at the bank for payment until after that date.
(d) A bill for ₹ 6,900 discounted with the bank is entered in the cash book with a recording of the discount charge of ₹ 800.
(e) ₹ 3,520 is entered in the cash book as paid into the bank on March 31st, 2017, but not credited by the bank until the following day.
(f) No entry has been made in the cash book to record the dishonour or on March 15, 2017, of a cheque for ₹ 650 received from Bhanu.
Prepare a reconciliation statement as of March 31, 2017.
Ans: The reconciliation statement is shown below: