WEEK 10
Posted: Wed Jun 24, 2015 9:30 pm
TOPIC: BANK RECOCILIATION
CONTENTS:
Interpretation of bank Statement
Adjustment of Cash Book
Bank reconciliation
SUB-TOPIC: INTERPRETATION OF BANK STATEMENTS
TREATMENT OF BANK RECONCILIATION
Starting with the balance as per Cash Book
Starting with the balance as per Bank Statement
Adjustment of the cash Book and preparation of Bank reconciliation Statement
1. METHOD 1.Starting with Cash balance:
When the Cash book balance is used, Unpresentedcheques, credit transfer and dividend are added while uncreditedcheques, bank charges, standing order, dishonouredcheque are deducted.
EXAMPLE 1: FORMAT on Balance as per Cash Book
N N
Balance as per Cash Book ×××
Add:unpresentedcheque ××× Dividend ××× Credit Transfer ××× ××× ×××
less:uncreditedcheques ××× Bank Charges ××× Dishonouredcheques ××× Standing order ××× (×××) Balance as per Bank Statement ×××
EXAMPLE 2: FORMAT On Balance as per Bank Statement
N N
Balance as per Bank Statement ×××
Add: uncreditedcheques ×××
Bank Charges ×××
Dishonouredcheques ×××
Standing order ××× ×××
×××
Less: unpresentedcheque ×××
Dividend ×××
Credit Transfer ××× ×××
Balance as per Cash Book ×××
ILLUSTRATION 1:
On 31st January 2013, BABA’s cash book showed a debit balance of N5, 000.00. His bank statement showed the balance of N5, 990.00. On comparison the following were found:
(a) Cheque issue amounting to N 2,500 had not been presented for payment.
(b) The bank reject a cheque amounting to N150.00
(c) Standing order of N120.00 to a club was not taken into consideration.
(d) A customer, Ayo paid N180.00 directly into the bank without any notice to the firm
(e) Bank charges of N170.00 were entered in the bank statement only
(f) A dividend of N250.00 was paid directly into the bank and not recorded in the cash book
(g) Cheques for N1,500.00 were entered into the cash book and paid to the bank but had not been cleared thus not credited
You are required to prepare the bank reconciliation statement for the month of January 2013
Suggested solution:
Bank Reconciliation Statement as at 31st January, 2013
Balance as per Cash Book 5,000.00
Add:
Unpresentedcheques 2,500.00
Dividend 250.00
Credit transfer (Ayo) 180.00 2,930.00
7,930.00
Less:
Uncreditedcheques 1,500.00
Standing order 120.00
Bank charges 170.00
Dishonouredcheques 150.00 1,940.00
Balance as per Bank Statement 5,990.00
Bank Reconciliation Statement as at 31st January, 2013
Balance as per Bank Statement 5,990.00
Add:
Uncreditedcheques 1,500.00
Standing order 120.00
Bank charges 170.00
Dishonouredcheques 150.00 1,940.00
Less:
Unpresentedcheques 2,500.00
Dividend 250.00
Credit transfer (Ayo) 180.00 2,930.00
Balance as per Cash Book 5,000.00
ILLUSTRATION 2:
Given below are the cash book (bank Column only) and the Bank statement of E. Kaka for the month of 31STJune, 2013.
Date Particulars Fol Cash
N Date Particulars Fol Cash
N
Jun 1
7
18
24
29
31 Bal.b/f
Jack .B
Bat. J
S. Onuchu
C. Okoro
Balance
c/d 5,000
1,200
900
1,200
3,200
700
12,200
Jun.2
9
15
21
30
31 J. Mama
Rita .C
A.A Ali
Matins D.
Abu .H
Peter .O
Balance
b/d 3,000
2,500
500
2,000
2,200
2,000
12,200
700
BANK STATEMENT SENT E.Kaka ON 31ST JUNE, 2013
DATE PARTICULARS DR
N CR
N BALANCE
June. 1
7
11
24
31
31
31
31
Balnceb/f
J. Mama
Jack .B
Matins.D
Abu .H
Bat. J
Bank charges
Jack.B(chequeDishonoured)
3,000.00
2,000.00
2,200.00
50.00
1,200.00
1,200.00
900.00 5,000.00
2,000.00
3,200.00
1,200.00
(1,000.00)
(100.00)
(150.00)
(1,350.00)
Required
Amend and balance E. Kaka’s cash book (bank column only) and reconcile this with her bank statement.
SUGGESTED SOLUTION:
Bracket in the bank statement and credit balance in the cash book (bank columns) represent overdrafts. Brackets generally represent negative values in accounting.
E.KAKA’S ADJUSTED CASH BOOK (BANK COLUMN ONLY) 31ST JUNE,2013
PARTICULARS N PARTICULARS N
Balance c/d 1,950.00
1,950.00
Balance b/f
Bank charges
Jack.B (DishonouredCheques)
Balance b/d 700.00
50.00
1,200.00
1,950.00
1,950.00
E.KAKA’S BANK RECONCILIATION STATEMENT (31ST JUNE, 2013)
N
Balance as per cash book (1,950.00)
Add: UnpresentedCheques:
Rita C 2,500.00
A A. Ali 500.00
Peter. O 2,000.00 5,000.00
3,050.00
Less: UncreditedCheques:
S. Onuchu 1,200.00
C.okoro 3,200.00 4,400.00
Balance as per Bank Statement (1,350.00)
Note: we may as well get the above result by removing the bracket and reversing the order of reconciliation as follows:
E.KAKA’S BANK RECONCILIATION STATEMENT (31ST JUNE,2013)
N
Balance as per statement (overdraft) 1,350.00 OD
Add: Uncreditedcheques
S. Onuchu 1,200.00
C. Okoro 3,200.00 4,400.00
3,050.00
Less:UnpresentedCheques:
Rita . C 2,500.00
A.A.Ali 500.00
Peter. O. 2,000.00 5,000.00
Balance as per Cash book 1,950.00 OD
EVALUATION: Check page 83 of Essential Financial Accounting and solve Exercise 9.12A
WEEK END ASSIGNMENT: Solve Exercise 9.5 and 9.6 on pages79 and80 of Essential Financial Accounting by O.A. Longe etal
PRE-READING ASSIGNMENT: Read about adjustment of Cash book and other methods.
WEEK END ACTIVITY: Solve Exercise 9.10, 9.11A and 9.13A on pages 82 -84 of Essential Financial Accounting by O.A Longe etal.
REFERENCE:
O.A. Longe, etal; Essential Financial Accounting, tonad publisher, Lagos, Nigeria 2012.
Frank Wood, Business Accounting 1, Longman, Nigeria, 2008.
CONTENTS:
Interpretation of bank Statement
Adjustment of Cash Book
Bank reconciliation
SUB-TOPIC: INTERPRETATION OF BANK STATEMENTS
TREATMENT OF BANK RECONCILIATION
Starting with the balance as per Cash Book
Starting with the balance as per Bank Statement
Adjustment of the cash Book and preparation of Bank reconciliation Statement
1. METHOD 1.Starting with Cash balance:
When the Cash book balance is used, Unpresentedcheques, credit transfer and dividend are added while uncreditedcheques, bank charges, standing order, dishonouredcheque are deducted.
EXAMPLE 1: FORMAT on Balance as per Cash Book
N N
Balance as per Cash Book ×××
Add:unpresentedcheque ××× Dividend ××× Credit Transfer ××× ××× ×××
less:uncreditedcheques ××× Bank Charges ××× Dishonouredcheques ××× Standing order ××× (×××) Balance as per Bank Statement ×××
EXAMPLE 2: FORMAT On Balance as per Bank Statement
N N
Balance as per Bank Statement ×××
Add: uncreditedcheques ×××
Bank Charges ×××
Dishonouredcheques ×××
Standing order ××× ×××
×××
Less: unpresentedcheque ×××
Dividend ×××
Credit Transfer ××× ×××
Balance as per Cash Book ×××
ILLUSTRATION 1:
On 31st January 2013, BABA’s cash book showed a debit balance of N5, 000.00. His bank statement showed the balance of N5, 990.00. On comparison the following were found:
(a) Cheque issue amounting to N 2,500 had not been presented for payment.
(b) The bank reject a cheque amounting to N150.00
(c) Standing order of N120.00 to a club was not taken into consideration.
(d) A customer, Ayo paid N180.00 directly into the bank without any notice to the firm
(e) Bank charges of N170.00 were entered in the bank statement only
(f) A dividend of N250.00 was paid directly into the bank and not recorded in the cash book
(g) Cheques for N1,500.00 were entered into the cash book and paid to the bank but had not been cleared thus not credited
You are required to prepare the bank reconciliation statement for the month of January 2013
Suggested solution:
Bank Reconciliation Statement as at 31st January, 2013
Balance as per Cash Book 5,000.00
Add:
Unpresentedcheques 2,500.00
Dividend 250.00
Credit transfer (Ayo) 180.00 2,930.00
7,930.00
Less:
Uncreditedcheques 1,500.00
Standing order 120.00
Bank charges 170.00
Dishonouredcheques 150.00 1,940.00
Balance as per Bank Statement 5,990.00
Bank Reconciliation Statement as at 31st January, 2013
Balance as per Bank Statement 5,990.00
Add:
Uncreditedcheques 1,500.00
Standing order 120.00
Bank charges 170.00
Dishonouredcheques 150.00 1,940.00
Less:
Unpresentedcheques 2,500.00
Dividend 250.00
Credit transfer (Ayo) 180.00 2,930.00
Balance as per Cash Book 5,000.00
ILLUSTRATION 2:
Given below are the cash book (bank Column only) and the Bank statement of E. Kaka for the month of 31STJune, 2013.
Date Particulars Fol Cash
N Date Particulars Fol Cash
N
Jun 1
7
18
24
29
31 Bal.b/f
Jack .B
Bat. J
S. Onuchu
C. Okoro
Balance
c/d 5,000
1,200
900
1,200
3,200
700
12,200
Jun.2
9
15
21
30
31 J. Mama
Rita .C
A.A Ali
Matins D.
Abu .H
Peter .O
Balance
b/d 3,000
2,500
500
2,000
2,200
2,000
12,200
700
BANK STATEMENT SENT E.Kaka ON 31ST JUNE, 2013
DATE PARTICULARS DR
N CR
N BALANCE
June. 1
7
11
24
31
31
31
31
Balnceb/f
J. Mama
Jack .B
Matins.D
Abu .H
Bat. J
Bank charges
Jack.B(chequeDishonoured)
3,000.00
2,000.00
2,200.00
50.00
1,200.00
1,200.00
900.00 5,000.00
2,000.00
3,200.00
1,200.00
(1,000.00)
(100.00)
(150.00)
(1,350.00)
Required
Amend and balance E. Kaka’s cash book (bank column only) and reconcile this with her bank statement.
SUGGESTED SOLUTION:
Bracket in the bank statement and credit balance in the cash book (bank columns) represent overdrafts. Brackets generally represent negative values in accounting.
E.KAKA’S ADJUSTED CASH BOOK (BANK COLUMN ONLY) 31ST JUNE,2013
PARTICULARS N PARTICULARS N
Balance c/d 1,950.00
1,950.00
Balance b/f
Bank charges
Jack.B (DishonouredCheques)
Balance b/d 700.00
50.00
1,200.00
1,950.00
1,950.00
E.KAKA’S BANK RECONCILIATION STATEMENT (31ST JUNE, 2013)
N
Balance as per cash book (1,950.00)
Add: UnpresentedCheques:
Rita C 2,500.00
A A. Ali 500.00
Peter. O 2,000.00 5,000.00
3,050.00
Less: UncreditedCheques:
S. Onuchu 1,200.00
C.okoro 3,200.00 4,400.00
Balance as per Bank Statement (1,350.00)
Note: we may as well get the above result by removing the bracket and reversing the order of reconciliation as follows:
E.KAKA’S BANK RECONCILIATION STATEMENT (31ST JUNE,2013)
N
Balance as per statement (overdraft) 1,350.00 OD
Add: Uncreditedcheques
S. Onuchu 1,200.00
C. Okoro 3,200.00 4,400.00
3,050.00
Less:UnpresentedCheques:
Rita . C 2,500.00
A.A.Ali 500.00
Peter. O. 2,000.00 5,000.00
Balance as per Cash book 1,950.00 OD
EVALUATION: Check page 83 of Essential Financial Accounting and solve Exercise 9.12A
WEEK END ASSIGNMENT: Solve Exercise 9.5 and 9.6 on pages79 and80 of Essential Financial Accounting by O.A. Longe etal
PRE-READING ASSIGNMENT: Read about adjustment of Cash book and other methods.
WEEK END ACTIVITY: Solve Exercise 9.10, 9.11A and 9.13A on pages 82 -84 of Essential Financial Accounting by O.A Longe etal.
REFERENCE:
O.A. Longe, etal; Essential Financial Accounting, tonad publisher, Lagos, Nigeria 2012.
Frank Wood, Business Accounting 1, Longman, Nigeria, 2008.