Money deposited into a bank is recorded in the bank column of a Cash Book on the debit side while withdrawals are recorded on the credit side. The bank also maintains an account of a customer in its books of accounts.
It credits such account for deposits and debits such account for any withdrawals. A copy of it is also given to the customer for the knowledge in the form of a Pass Book or a Statement of Account. Learn Amendments in Cash Book here.
Deposits and withdrawals made during a period are recorded in both Cash Book and Pass Book. Therefore, the balances shown by the two at the end of the period should agree.
But, sometimes the two balances differ. It becomes necessary to know the reason for the difference. Therefore, a Bank Reconciliation Statement is prepared on a particular date to reconcile the bank balances in both Cash Book and Pass Book by showing the reason for differences.
In order to find out the correct balance at Bank or cash, it sometimes requires to amend the Cash Book before the preparation of Bank Reconciliation statement. After an amendment, the Bank Reconciliation Statement should be prepared by taking the balance shown by the amended Cash Book.
Before making any amendment one should remember that usually two types of transactions are recorded in amended Cash Book i.e.
Then the rest of the transactions i.e the transaction other than already recorded in Cash Book will go to Bank reconciliation statement. But one should remember that preparation of amended Cash Book is possible only when the balance as per Cash Book is given.
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The following is a summary from Cash Book of M/s Avinash Trading for the month of Sept 2018
| Particulars | Amount | Particulars | Amount |
| Balance b/d | 1,407 | Payments | 15,520 |
| Receipts | 15,073 | Balance c/d | 960 |
| 16,480 | 16,480 |
On investigation, the following are the findings:
(a) Bank charges of Rs. 350 were not entered in the Cash Book.
(b) A cheque of Rs. 470 issued to the supplier was entered by mistake as a receipt in the Cash Book.
(c) A cheque of Rs. 180 was returned by the Bank marked as ‘refer to drawer’ but it’s not entered in Cash Book.
(d) The balance brought forward in Sept 2018 should have been Rs. 14,700.
(e) Cheques paid to suppliers Rs. 2,140, Rs. 3,700 and Rs. 300 have not been presented for payment.
(f) Deposits of Rs. 15,420 on 30th Sept were cleared by the Bank on 2nd October.
(g) The Bank charged a cheque wrongly to Avinash trading Rs. 720.
(h) Bank statement shows overdraft of Rs. 1,240 as on 30th Sept 2018.
Show what adjustments will you make in the Cash Book and prepare a Bank reconciliation statement as on 30/09/2018.
Solution:
Cash Book for Sept 2018
| Particulars | Amount | Particulars | Amount |
| To Original balance b/d | 9,600 | By Bank charges not recorded earlier | 350 |
| To Error in balance carried |
Bank Reconciliation as on 30/9/2018
| Particulars | Amount | Amount |
| Balance as per Cash Book | 8,760 | |
| Add: Cheques issued but not presented (2,140 + 3,700 + 300) | 6,140 | |
| 14,900 | ||
| Less: (i) Deposits not cleared | 15,420 | |
| (ii) Cheques charged by mistake | 720 | 16,140 |
| Overdraft as per Pass Book | (1,240) |
