BANK RECONCILIATION STATEMENT II

BANK RECONCILIATION STATEMENT II

Aside from various forms of items listed earlier, the following can still be cause of disagreement between bank statement and cash book:

1. DIRECT DEBIT: T his occurs when a creditor is authourised to ask for payment from the customer’s bank, in this case the bank will debit the account of the customer with the some of money paid to the creditor.

2. UNDERCASTING OF RECEIPTS OF CASH BOOK: The balance of receipt side of cash book may also be understated. In this case, the cash book balance will be lower than the bank balance.

3. . OVERCASTING OF RECEIPTS OF CASH BOOK: When bringing down the balances, the receipt side of the cash book can be overstated. Therefore, making the cash book amount to be more than the bank statement amount.

4. UNDERCASTING/ OVERCASTING OF PAYMENT SIDE OF THE CASH BOOK: Either of these can also cause disagreement in the cash book or bank statement.

5. BANK ERROR: Error can also occur in the bank during posting of items into different account, this will also reflects in the bank statement.

COMPREHENSIVE FORMAT OF BANK RECONCILIATION STATEMENT

ILLUSTRATION 1:

On 31st July, 1995, Olateju’s cash book showed a debit balance of N3,800.  His bank statement showed an overdraft balance of N940. On investigations, the following errors were discovered:

a. A cheque of N680 paid to Nestle PLC  had been entered in the cash book as N800.

b. The bank received a credit transfer of N200 from the customers.

c. A standing order of N60 had not been entered in the cash book.

d. Cash paid into the bank for N200 had been entered in the cash book as N180.

e. A transfer of N3,000 to capital bank had not been entered in the cash book.

f. The book balance had been incorrectly brought down at 1st August, 1995 as a debit balance of N2,400 instead of a debit balance of N2,200.

g. Bank charges N40 did not appear in the cash book.

h. Cheques paid into the bank had been incorrectly totalled. the amount should have been N340 instead of N300.

i. Cheques drawn amounting to N80 had not been paid into the bank.

j A receipt of N20 shown on  the bank statement had not been entered in the cash book.

N100 was dishonoured.

k. A cheque for N100 was dishonoured.

l. Receipt of N1,800 paid into the bank on 31st July, 1995 did not appear on the bank pass sheet until August.

You are required to prepare  the bank reconciliation statement as at 31st July, 1995.

SOLUTION:

ASSIGNMENT:

On 31st July, 1995, Akande’s cash book showed a debit balance of N6,000. Determine his bank statement amount. On investigations, the following errors were discovered:

a. A cheque of N680 paid to Nestle PLC  had been entered in the cash book as N00.

b. The bank received a credit transfer of N200 from the customers.

c. A standing order of N80 had not been entered in the cash book.

d. Cash paid into the bank for N400 had been entered in the cash book as N180.

e. A transfer of N5,000 to capital bank had not been entered in the cash book.

f. The book balance had been incorrectly brought down at 1st January, 1995 as a debit balance of N3,300 instead of a debit balance of N2,200.

g. Bank charges N70 did not appear in the cash book.

h. Cheques paid into the bank had been incorrectly totalled. the amount should have been N640 instead of N300.

i. Cheques drawn amounting to N100 had not been paid into the bank.

j A receipt of N50 shown on  the bank statement had not been entered in the cash book.

N100 was dishonoured.

k. A cheque for N500 was dishonoured.

l. Receipt of N2,000 paid into the bank on 31st January, 1995 did not appear on the bank pass sheet until August.

You are required to prepare  the bank reconciliation statement as at 31st January, 1995.