NCERT Solutions for Class 11 Accountancy Chapter 5 Bank Reconciliation Statement

Q.1 State the need for the preparation of bank reconciliation statement?

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Bank reconciliation statement is a statement prepared mainly to reconcile the difference between the ‘Bank Balance’ shown by the Cash Book and Bank Pass Book.

Q.2 What is a bank overdraft?

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When a bank gives a firm the facility of withdrawing in excess of its deposits, this excess withdrawal is called overdraft. The bank charges interest on this overdraft and debits the firm’s account from such interest time to time.

Q.3 Briefly explain the statement wrongly debited by the bank with the help of an example.

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Omission or wrong recording of transactions relating to cheques deposited and wrong totaling etc, committed by the bank while posting entries in the passbook also cause differences between passbook and cashbook balance.

Q.4 State the causes of difference occurred due to time lag.

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Differences caused by Time Gap in recording transactions:

• Cheques issued but not presented for payment in the bank.
• Cheques paid into the bank for collection but not yet credited by the bank.
• Cheques paid into the bank for collection but dishonoured by the bank.
• Interest allowed by the bank.
• Interest charged by the bank on overdraft.
• Bank charges and commission charged by the bank.
• Interest and dividend collected by the bank.

Q.5 Briefly explain the term ‘favourable balance as per cash book’.

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Bank Reconciliation Statement if started with debit, i.e.., favourable balance as per cash book, each entry causing difference is analysed to ascertain its effect on cash book balance, i.e., whether it has held to increase or decrease in the Cash Book balance.

Entries that have led to decreased Cash Book balance such as: (Cheque issued but not presented for payment, Interest credited by the bank but not recorded in the cash book, Direct deposit into the bank not recorded in the cash book) are added to the balance as per cash book.

Similarly, entries of differences that have led to increased cash book balance such as (cheques deposited but not credited by bank, bank charges debited by the bank) are deducted from the balance as per Cash Book.

Q.6 Enumerate the steps to ascertain the correct cash book balance.

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Bank Reconciliation Statement is prepared starting with the corrected Cash Book Balance taking the following steps:

Step 1: Draw up Cash Bank column only. If favourable balance (Dr. Balance) as per the cash book is given, write the balance on the debit side of the cash book. If unfavourable balance or overdraft as per the cash book is given, write the balance on the credit side of the cash book.

Step 2: Pass entries in the Cash Book in respect of the following items:

Amount recorded in the Pass book but not recorded in the Cash Book that should have been recorded.

Rectifying entries in respect of errors committed in the Cash Book.

At this point, balance as per adjusted cash book is known.

Step 3:

Adjusted balance of the cash book is taken as starting point, Bank Reconciliation Statement is prepared listing the entries causing difference and arriving at the balance as per bank statement or bank pass book.

Q.7 What is a bank reconciliation statement? Why is it prepared?

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Bank Reconciliation Statement is a statement prepared to reconcile the bank balance as per Cash Book with the balance as per Bank Statement or Bank Pass Book.

Need and Importance of Bank Reconciliation Statement:

• A bank reconciliation statement locates the errors or commission that may have committed either on the part of the customer or the bank. The errors so detected can be rectified accordingly.
• By preparing a bank reconciliation statement, the customer becomes sure of the correctness of the bank balance shown by the cash book. It helps him in making further transactions with the bank.
• A reconciliation statement facilitates the preparation of a revised cash book.
• Periodic preparation of this statement reduces the chances of embezzlement by the staff of the firm or even that of the bank.
• A reconciliation statement helps in revealing the unnecessary delay in the collection of cheques by the bank.
• It also helps in keeping a track of cheques which have been sent to the bank for collection.

Q.8 Explain the reasons where the balance shown by the bank passbook does not agree with the balance as shown by the bank column of the cash book.

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Reconciliation of the cash book and the bank pass book balances amounts to an explanation of differences between them. The difference between the cash book and the bank passbook is caused by:

• Timing differences on recording of the transactions.
• Errors made by the business or by the bank.

Timing Differences:

When a business compares the balance of its cash book with the balance shown by the bank passbook, there is often a difference, which is caused by the time gap in recording the transaction relating either to payments or receipts.

The factors affecting time gap includes:

• Cheques issued by the bank but not yet presented for payment.
• Cheques paid into the bank but not yet collected.
• Direct debits made by the bank on behalf of the customer.
• Amounts directly deposited in the bank account.
• Interest and dividends collected by the bank.
• Direct payments made by the bank on behalf of the customer.
• Cheques deposited/bills discounted dishonoured.

Differences caused by errors:

Sometimes the difference between the two balances may be accounted for by an error on the part of the bank or an error in the cash book of the business. This cause difference between the bank balance shown by the cash book and the balance shown by the bank statement.

Errors committed in recording transaction by the firm: Omission or wrong recording of transactions relating to cheques issued, cheques deposited and wrong totaling, etc. committed by the firm while recording entries in the cash book cause difference between cash book and passbook balance.

Errors committed in recording transactions by the bank: Omission or wrong recoding of transaction relating to cheques deposited and wrong totaling etc. committed by the bank while posting entries in the passbook also cause difference between passbook and cashbook balance.

Q.9 Explain the process of preparing bank reconciliation statement with amended cash balance.

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While preparing bank reconciliation statement, under amended cash balance approach, the balance as per cash book or as per pass book is the starting item. The debit balance as per the cash book means the balance of deposits held at the bank.

Such a balance will be a credit balance as per the pass book. It is also called the favourable balance as per cash book or favourable balance as per pass book. Such a balance exists when the deposits made by the firm are more than its withdrawals.

On the other hand, the credit balance as per the cash book indicates bank overdraft. In other words, the excess amount withdrawal over the amount deposited in the bank. It is also known as unfavorable balance as per cash book or unfavorable balance as per pass book.

The following steps will be followed in preparation of the bank reconciliation statement:

• The first step is to put the balance of cash book or pass book. The first item in the statement is generally the balance as shown by the cash book. Alternatively, the starting point can also be the balance as per pass book. Considering the balance as per cash book, the following further steps will be followed.
• The cheques deposited but not yet collected are deducted.
• All the cheques issued but not yet presented for payment, amounts directly deposited in the bank account are added.
• All the items of charges such as interest on overdraft, payment by bank on standing instructions and debited by the bank in the pass book but not entered in cash book, bills and cheques dishonoured etc are deducted.
• All the credits given by the bank such as interest on dividends collected etc and direct deposits in the bank are added.
• Adjustments for errors are made according to the principles of rectification of errors.

Q.10 From the following particulars, prepare a bank reconciliation statement as at March 31, 2017.

1. Balance as per cash book ₹3,200
2. Cheque issued but not presented for payment ₹1,800
3. Cheque deposited but not collected up to March 31, 2017 ₹2,000
4. Bank charges debited by bank ₹150.

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Q.11 On March 31, 2017 the cash book showed a balance of ₹3,700 as cash at bank, but the bank passbook made up to same date showed that cheques for ₹700, ₹300 and ₹180 respectively had not presented for payment. Also cheque amounting to ₹1,200 deposited into the account had not been credited. Prepare a bank reconciliation statement.

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Q.12 The cash book shows a bank balance of ₹7,800. On comparing the cash book with passbook the following discrepancies were noted:

1. Cheque deposited in bank but not credited ₹3,000.
2. Cheque issued but not yet present for payment ₹ 1,500.
3. Insurance premium paid by the bank ₹2,000.
4. Bank interest credit by the bank ₹400.
5. Bank charges ₹100.
6. Directly deposited by a customer ₹4,000.

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Q.13 Prepare a bank reconciliation statement as on December 31, 2016.
Bank balance of ₹ 40,000 showed by 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 has credited Atul for ₹ 325 as interest and had debited him with ₹ 50 as bank charges for which there were no corresponding entry in the cash book.
Prepare a bank reconciliation statement as on December 31, 2016.

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Q.14 Prepare a reconciliation statement as on March 31, 2017.
On comparing the cash book with passbook of Naman it is found that on March 31, 2017. Bank balance of ₹ 40,960 showed by the cash book differ 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) Cheque totaling ₹ 12,980 were issued by the company and duly recorded in the cash book before March 31, 2017 but has 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 without recording the discount charge for ₹ 800.
(e) ₹ 3,520 is entered in the cash book as paid into bank on March 31, 2017 but not credited by the bank until the following day.
(f) No entry has been made in the cash book to record the dishonor on March 15, 2017 of a cheque for ₹ 650 received from Bhanu.
Prepare a reconciliation statement as on March 31, 2017.

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Q.15 Prepare bank reconciliation statement as on December 31, 2017. On this day the passbook of Mr. Himanshu showed a balance of ₹7,000.

1. Cheques of ₹1,000 directly deposited by a customer.
2. The bank has credited Mr. Himanshu for ₹700 as interest.
3. Cheques for ₹3,000 were issued during the month of December but of these cheques for ₹1,000 were not presented during the month of December.

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Q.16 From the following particulars prepare a bank reconciliation statement showing the balance as per cash book on December 31, 2016.
(a) Two cheques of ₹ 2,000 and ₹ 5,000 were paid into bank in October 2016 but were not credited by the bank in the month of December.
(b) A cheque of ₹ 800 which was received from a customer was entered in the bank column of the cash book in December 2016 but was omitted to be banked in December 2016.
(c) Cheque for ₹ 10,000 were issued into bank in November 2016 but not credited by the bank on December 31, 2016.
(d) Interest on Investment ₹ 1,000 collected by bank appeared in the passbook.
Balance as per pass book was ₹ 50,000.

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Q.17 Balance as per passbook of Mr. Kumar is ₹3,000.

1. Cheque paid into bank but yet cleared
   Ram kumar: ₹1,000, Kishore Kumar: ₹500
2. Bank charges: ₹300
3. Cheque issued but not presented:
   Hameed: ₹2,000, Kapoor: ₹500
4. Interest entered in the passbook but not entered in the cash book ₹100.
   Prepare a bank reconciliation statement.

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Q.18 The passbook of Mr. Mohit current account showed a credit balance of ₹20,000 on dated December 31, 2016. Prepare a Bank Reconciliation Statement with the following information.

1. A cheque of ₹400 drawn on his saving account has been shown on current account.
2. He issued two cheques of ₹300 and ₹500 on December 25, but only the 1^st cheque was presented for payment.
3. One cheque issued by Mr. Mohit of ₹500 on December 25, but it was not presented for payment whereas it was recorded twice in the cash book.

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Q.19 On 1^st January, 2017, Rakesh had an overdraft of ₹8,000 as showed by his cash book. Cheques amounting to ₹2,000 had been paid in by him but were not collected by the bank by January 01, 2017. He issued cheque of ₹800 which were not presented to the bank for payment up to that day. There was a debit in his passbook of ₹60 for interest and ₹100 for bank charges.
Prepare bank reconciliation statement for comparing both the balance.

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Q.20 Prepare bank reconciliation statement,

1. Overdraft shown as per cash book on December 31, 2017 ₹10,000.
2. Bank charges for the above period also debited in the passbook ₹100.
3. Interest on overdraft for six months ending December 31, 2017 ₹380 debited in the passbook.
4. Cheques issued but not encashed prior to December 31, 2017 amounted to ₹2,150.
5. Interest on investment collected by the bank and credited in the passbook ₹600.
6. Cheques paid into bank but yet not cleared before December, 31 2017 were ₹1,100.

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Q.21 Kumar find that the bank balance shown by his cash book on December 31, 2017 is ₹90,600 (Credit) but the passbook shows a difference due to the following reason:
A cheque (post dated) for ₹1,000 has been debited in the bank column of the cash book but not presented for payment. Also, a cheque for ₹8,000 drawn in favour of Manohar has not yet been presented for payment. Cheques totaling ₹1,500 deposited in the bank have not yet been collected and cheque for ₹5,000 has been dishonored.

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Q.22 On December 31, 2017 the cash book of Mittal Bros. showed an overdraft of ₹ 6,920. From the following particulars prepare a bank reconciliation statement and ascertain the balance as per passbook.
(1) Debited by bank for ₹ 200 on account of interest on overdraft and ₹ 50 on account of charges for collecting bills.
(2) Cheques drawn but not encashed before December, 31 2017 for ₹ 4,000.
(3) The bank has collected interest and has credited ₹ 600 in passbook.
(4) A bill receivable for ₹ 700 previously discounted with the bank had been dishonoured and debited in the passbook.
(5) Cheques paid into bank but not collected and credited before December 31, 2017 amounted ₹ 6,000.

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Q.23 Prepare bank reconciliation statement of Shri Bhandari as on March 31, 2017.

1. The payment of a cheque for ₹ 550 was recorded twice in the passbook.
2. Withdrawal column of the passbook under cast by ₹ 200.
3. A cheque of ₹ 200 has been debited in the bank column of the cash book but it was not sent to bank at all.
4. A cheque of ₹ 300 debited to bank column of the cashbook was not sent to the bank.
5. ₹ 500 in respect of dishonoured cheque were entered in the passbook but not in the cash book.

Overdraft as per passbook is ₹ 20,000.

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Q.24 Overdraft shown by the passbook of Mr. Murli is ₹20,000. Prepare bank reconciliation statement on March 31, 2017.

1. Bank charges debited as per passbook ₹500.
2. Cheques recorded in the cash book but not sent to the bank for collection ₹2,500.
3. Received a payment directly from customer ₹4,600.
4. Cheque issued but not presented for payment ₹6,980.
5. Interest credited by the bank ₹100.
6. LIC paid by bank ₹2,500.
7. Cheques deposited with the bank but not collected ₹3,500.

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Q.25 Raghav & Co. have two bank accounts. Account No. I and Account No. II.
From the following particulars relating to Account No. I find out the balance on that account of March 31, 2017 according to the cash book of the firm.

1. Cheques paid into bank prior to March 31, 2017, but not credited for ₹10,000.
2. Transfer of funds from account no. II to account no. I recorded by the bank on March 31, 2017 but entered in the cash book after that date for ₹8,000.
3. Cheques issued prior to March 31, 2017 but not presented until after that date for ₹7,429.
4. Bank charges debited by bank not entered in the cash book for ₹200.
5. Interest debited by the bank not entered in the cash book ₹580.
6. Overdraft as per passbook ₹18,990.

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Q.26 Prepare a bank reconciliation statement from the following particulars and show the balance as per cash book:

1. Balance as per passbook on March 31, 2017 overdrawn ₹20,000.
2. Interest on bank overdraft not entered in the cash book ₹2,000.
3. ₹200 insurance premium paid by bank has not been entered in the cash book.
4. Cheques drawn in the last week of March, 2017 but not cleared till date for ₹3,000 and ₹3,500.
5. Cheques deposited into bank on February, 2017, but yet to be credited on dated March 31, 2017 ₹6,000.
6. Wrongly debited by bank ₹500.

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Q.27 The passbook of Mr. Randhir showed an overdraft of ₹40,950 on March 31, 2017.
Prepare bank reconciliation statement on March 31, 2017.

1. Out of cheques amounting to ₹8,000 drawn by Mr. Randhir on March 27 a cheuqe for ₹3,000 was encashed on April 2017.
2. Credited by bank with ₹3,800 for interest collected by them, but the amount is not entered in the cash book.
3. ₹10,900 paid in by Mr. Randhir in cash and by cheque on March, 31 cheques amounting to ₹3,800 were collected on April, 07.
4. A cheque of ₹780 credited in the passbook on March 28 being dishonoured is debited again in the passbook on April 01, 2017. There was no entry in the cash book about the dishonour of the cheque until April 15.

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