Question 49 of 50advanced🔧 ApplyNumerical5 marks

Prepare a bank reconciliation statement from the following particulars and show the balance as per cash book. (i) Balance as per passbook on March 31, 2017 overdrawn ₹ 20,000. (ii) Interest on bank overdraft not entered in the cash book ₹ 2,000. (iii) ₹ 200 insurance premium paid by bank has not been entered in the cash book. (iv) Cheques drawn in the last week of March 2017, but not cleared till date for ₹ 3,000 and ₹ 3,500. (v) Cheques deposited into bank on February 2017, but yet to be credited on dated March 31, 2017 ₹ 6,000. (vi) Wrongly debited by bank ₹ 500.

Correct Answer

Bank Reconciliation Statement as on March 31, 2017: Particulars: (i) Overdraft as per Passbook: ₹ 20,000 (Add); (ii) Cheques issued but not presented (₹ 3,000 + ₹ 3,500): ₹ 6,500 (Add); (iii) Interest on Overdraft: ₹ 2,000 (Less); (iv) Insurance Premium paid by Bank: ₹ 200 (Less); (v) Cheques deposited but not credited: ₹ 6,000 (Less); (vi) Wrongly debited by Bank: ₹ 500 (Less). Overdraft as per Cash Book: ₹ 17,800.

Exercise: Questions for Practice - Numerical Questions (Unfavourable balance of passbook) | Q: 17 | (Page 19)
For More Understanding

Explanation

To prepare the Bank Reconciliation Statement, we start with the Overdraft as per the Passbook (₹ 20,000). We adjust for timing differences and errors. Cheques issued but not presented (₹ 6,500) are added back because they reduce the Cash Book balance but haven't cleared the bank yet. Amounts debited by the bank but not in the Cash Book—Interest (₹ 2,000), Insurance (₹ 200), and Wrong Debit (₹ 500)—are deducted because they make the Passbook overdraft larger than the Cash Book. Cheques deposited but not credited (₹ 6,000) are deducted because they are in the Cash Book but not the Passbook.

Solution Steps

  1. Step 1: Identify Starting Balance Start with the Overdraft as per Passbook of ₹ 20,000.

  2. Step 2: Adjust for Cheques Issued but Not Presented Add the amount of cheques drawn but not cleared: ₹ 3,000 + ₹ 3,500 = ₹ 6,500. (This increases the balance towards the Cash Book figure).

  3. Step 3: Adjust for Bank Debits not in Cash Book Less amounts debited by the bank but not recorded in the cash book: Interest on overdraft ₹ 2,000 and Insurance premium ₹ 200.

  4. Step 4: Adjust for Uncredited Cheques and Bank Errors Less the amount of Cheques deposited but not credited ₹ 6,000. Also Less the amount Wrongly debited by bank ₹ 500.

  5. Step 5: Calculate Final Balance Calculation: 20,000 (Start) + 6,500 (Add) - 2,000 - 200 - 6,000 - 500 = ₹ 17,800. This is the Overdraft as per Cash Book.

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