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Chapter 7

Chapter 7 discusses the Bank Reconciliation Statement, highlighting its advantages such as risk avoidance, fraud prevention, and reduced accounting work. It outlines the causes of discrepancies between the bank pass book and cash book, and emphasizes the importance of preparing a reconciliation statement to identify these differences and ensure accurate financial records. The chapter also details the steps involved in preparing the statement, including analyzing the effects of discrepancies on the balances.

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12 views6 pages

Chapter 7

Chapter 7 discusses the Bank Reconciliation Statement, highlighting its advantages such as risk avoidance, fraud prevention, and reduced accounting work. It outlines the causes of discrepancies between the bank pass book and cash book, and emphasizes the importance of preparing a reconciliation statement to identify these differences and ensure accurate financial records. The chapter also details the steps involved in preparing the statement, including analyzing the effects of discrepancies on the balances.

Uploaded by

nxyvvpfysg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Chapter 7

Bank Reconciliation Statement

ADVANTAGES OF KEEPING A BANK ACCOUNT

1. Avoidance of risk

2. Prevention of fraud and misappropriation

3. Reduction in accounting work

Financial Accounting for BBA 2e,


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SN Maheshwari et al., Vikas Publishing House (P) Ltd.
Causes of Difference The following are the causes of difference

between the balance as shown by the bank pass book and the

balance as shown by the firm’s cash book.

1. Cheques issued but not presented for payment

2. Cheques sent for collection but not yet collected

3. Bank charges

4. Direct collections on behalf of customers


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SN Maheshwari et al., Vikas Publishing House (P) Ltd.
MEANING AND OBJECTIVE OF
BANK RECONCILIATION STATEMENT

Meaning A Bank Reconciliation Statement is a statement reconciling the balance

as shown by the bank pass book and the balance as shown by the cash book.

Objective The objective of preparing such a statement is to know the causes of

difference between the two balances and pass necessary correcting or adjusting

entries in the books of the firm.

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SN Maheshwari et al., Vikas Publishing House (P) Ltd.
IMPORTANCE OF
BANK RECONCILIATION STATEMENT

(i) It highlights the causes of difference between the bank balance as per cash book and the bank

balance as per pass book.

(ii) It reduces the chances of fraud by the staff handling cash .

(iii) There is a moral check on the staff of the organisation to keep the cash records always up-to-

date.

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SN Maheshwari et al., Vikas Publishing House (P) Ltd.
TECHNIQUE OF PREPARING
BANK RECONCILIATION STATEMENT

Steps

(i) The cash book should be completed and the balance as per the bank column on a

particular date should be arrived at for the period.

(ii) The Bank should be requested to complete and send to the firm the bank pass book up to

the date on which the reconciliation statement is to be prepared.

(iii) The balance as shown by either the cash book or the bank pass book should be taken

as the base.

(Contd…)

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SN Maheshwari et al., Vikas Publishing House (P) Ltd.
(iv) The effect of that particular cause of difference should be studied on the

balance shown by the other book.

(v) In case the cause has resulted in an increase in the balance shown by the

other book, the amount of such an increase should be added to the balance

shown in the former book which has been taken as the base.

(vi) In case the cause has resulted in a decrease in the balance shown by the

other book, the amount of such a decrease should be deducted from the balance

shown in the former book which has been taken as the base.

In case the book shows an adverse balance (i.e., an overdraft) the amount of the

overdraft should be transferred to minus column.

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SN Maheshwari et al., Vikas Publishing House (P) Ltd.

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