DEFINITION OF BANK RECONCILIATION STATEMENT
Bank Reconciliation Statement is the agreement of the balance on a company`s cash book with the balance shown on the bank statement sent by the bank in respect of such account.
THE CAUSES OF BANK RECONCILIATION STATEMENT
The following are the major causes of the difference between bank balance as shown on the cash book and that of the bank statement:
i. Unpresented Cheques
ii. Uncredited Cheques
iii. Errors by the bank
iv. Items that should have been credited to the cash book but was not done because of delay in receiving debit advice from bank. E.g. standing order, cheque book charges, bank charges, dishonoured cheques.
v. Items that should have been debited to the cash book but not done because of delay in receiving credit advice from bank e.g. credit transfer, dividend warrantee.
vi. Errors by the book keeper.
ILLUSTRATION 1:
On 31st December 2021, Sogbae cash book showed a debit balance of N29,520.
His bank statement showed a credit balance of N25,260.
The reasons for the difference were follow:
i. A cheque of N1,960 was received and entered in the cash book but was not recorded in the bank statement.
ii. Unpresented cheques totalled N3,740.
iii. The payment side of the cash book had been undercasted by N2,000.
iv. Standing order for N1,260 appearing in the bank statement was yet to be posted in the cash book.
v. A bill of exchange of N1,340 had matured and the bank had paid on Sogbae behalf but it had not been recorded in the cash book.
vi. A withdrawal of N1,440 by Banuso, another customer of the bank had been charged in error to Sogbae account.
You are required to prepare:
a. Adjusted cash book
b. Bank Reconciliation Statement.
SOLUTION
|
(a) SOGBAE |
|
|
ADJUSTED CASHBOOK FOR THE MONTH OF DECEMBER 31, 2021 |
|
|
Balance B/f 29,520 |
Undercasted 2,000 |
|
Standing Order 1,260 |
|
|
Bill of Exchange 1,340 |
|
|
Balance C/f 24,920 |
|
|
29,520 |
29,520 |
|
Balance B/f 24,920 |
|
|
(b) SOGBAE |
|
BANK RECONCILIATION STATEMENT |
|
AS AT 31ST DECEMBER,2021 N |
|
Balance as per adjusted cashbook 24,920 |
|
Add: Unpresented Cheque 3,740 |
|
28,660 |
|
Less: Uncredited Cheque 1,960 |
|
Bank Error 1,440 |
|
3,400 |
|
Balance as per bank statement 25260 |
ILLUSTRATION 2:
Foyegbe Nigeria Limited has the following transactions in its cashbook and bank statements for September 2017.
|
|
CASHBOOK |
|
|
|
Lodgements: |
N |
Payments: |
N |
|
CHQ. 6789 |
28,000 |
CHQ. 123456 |
8,000 |
|
CHQ. 4591 |
24,000 |
CHQ.123457 |
12,000 |
|
CHQ. 4826 |
19,000 |
CHQ. 123458 |
15,000 |
|
CHQ. 4725 |
38,000 |
CHQ. 123459 |
25,000 |
|
CHQ.4228 |
18,000 |
CHQ. 123460 |
16,000 |
|
Cash |
132,000 |
CHQ. 123461 |
3,000 |
|
Balance C/d |
180,000 |
||
|
259,000 |
|
259,000 |
|
|
Balance B/d |
180,000 |
|
|
|
BANK STATEMENT |
|||
|
DR N |
CR N |
BALANCE N |
|
|
CHQ.123459 |
25,000 |
25,000 |
|
|
CHQ. 123458 |
15,000 |
40,000 |
|
|
CHQ. 4826 |
19,000 |
21,000 |
|
|
CHQ. 6789 |
28,000 |
7,000 |
|
|
CHQ. 123460 |
16,000 |
9,000 |
|
|
CHQ.4826 CONTRA |
19,000 |
28,000 |
|
|
ICAN |
500 |
28,500 |
|
|
COT |
1,000 |
29,500 |
|
|
Commission |
3,500 |
33,000 |
|
|
CHQ. 4228 |
18,000 |
15,000 |
|
|
CHQ. 123457 |
12,000 |
27,000 |
|
|
Cash |
132,000 |
105,000 |
|
You are required to:
(a) Prepare an adjusted cash book
(b) Reconcile the adjusted cash book balance with the bank statement.
SOLUTION
FOYEGBE NIGERIA LIMITED
ADJUSTED CASH BOOK
|
Balance b/f |
180,000 |
Standing Order |
500 |
|
Bank Chages-COT |
1,000 |
||
|
Bank Chages-Commission |
3,500 |
||
|
Balance c/d |
175,000 |
||
|
180,000 |
|
180000 |
|
|
Balance b/d |
175,000 |
|
BANK RECONCILIATION STATEMENT
AS AT 31ST SEPTEMBER, 2017
N N
Balance as per adjusted cash book 175,000
Add: Unpresented Cheques:
Cheque 123456 8,000
Cheque 123461 3,000 11,000
186,000
Less: Uncredited Lodgement:
Cheque 4591 24,000
Cheque 4826 19,000
Cheque 4725 38,000 81,000
Balance as per Bank Statement 105,000
VIDEOS EXPLANATION OF BANK RECONCILIATION STATEMENT BY CORPORATE FINANCE INSTITUTE AND SAHEB ACADEMY (PART 1-5).
Enjoy the videos by clicking those links bleow:
By Corporate Finance Institute:
https://www.youtube.com/watch?v=baViKIx58fo
By Saheb Academy:
Part 1:
https://www.youtube.com/watch?v=_RfayQTf5zU
Part 2:
https://www.youtube.com/watch?v=8oVhHmX39mw
Part 3:
https://www.youtube.com/watch?v=S9iOvY5FkDQ
Part 4:
https://www.youtube.com/watch?v=sG3QXo2-IdQ
Part 5:
https://www.youtube.com/watch?v=mLEdgZPkhVA
REVIEW QUESTIONS
1. Ajimatanraeje`s cash book showed a debit balance of N3,344 on 31st May, 2022. His bank statement for May 2022 however showed a credit balance of N3,424.
On investigation, it was discovered that:
i. The opening balance in the cash book for the month had been wrongly brought down as N1,505 instead of N1,550.
ii. Payment of rent N250 had been debited in the cash book.
iii. A customer had paid N600 direct into the bank.
iv. The bank had paid on a standing order N300 to an insurance company
v. A cheque for N870 deposited in the bank on 25th May, 2022 was credited until 3rd June, 2022.
vi. Cheques paid to suppliers totaling N1,875 had not been presented for payment.
vii. Cost of cheque book and other charges by bank totaling N90 had not been entered in the cash book.
viii. The bank had paid a cheque of N680 in error from Ajimatanraeje`s Account.
You are required to prepare:
(a) Adjusted Cash Book for the month of May 2022.
(b) Bak Reconciliation Statement as at 31st May, 2022.
2. The following was the cash book (bank column) of Odebeodero Nigeria Limited for the month of May 2022:
|
CASH BOOK ( BANK COLUMN) FOR THE MONTH OF MAY 2022 |
|||
|
N |
|
N |
|
|
Balance 01/05/2022 |
2010 |
Favour-Cheque No. ABX |
605 |
|
Adetutu-Cheque No. 102 |
670 |
Frank-Cheque No. AXY |
210 |
|
Bassey - Cheque No. 12X |
335 |
Mary- Cheque No. X2 |
130 |
|
Cynthia - Cheque No. 2B1 |
1,225 |
Salaries |
7,000 |
|
Cash |
770 |
Purchases |
550 |
|
Sales |
3,000 |
Samuel- Cheque No. 001 |
312 |
|
Balance 31/05/2022 |
797 |
|
|
|
8807 |
|
8807 |
|
|
Balance 01/06/2022 |
797 |
||
Upon investigations, it was discovered that:
i. Bank Charges of N50 reflected on the bank statement have not been posted into the cash book.
ii. Cheque No. 2B1 for N1,225 was dishonoured on presentation. No entry has been effected to reflect the dishonour.
iii. The opening balance in the cash book should have been N2,100.
iv. The bank has settled a standing order of N600 payment to insurance company.
v. All cheques issued and receipts have been paid and credited by the bank respectively except the following:
1. Cheque No. 12X N335
2. Cheque No.001 N312
3. Cheque No.ABX N605
4. Cheque No.X2 N130
vi. The bank statement shows an overdrawn balance of N1,870.
Required:
(a) Revised cash book entries of Odebeodero Nigeria Limited for the month of May 2022.
(b) Bank Reconciliation Statement as at May 31, 2022.
3. Feyikogbon`s cash book showed a debit balance of N6,688 on 31st May, 2022. His bank statement for May 2022 however showed a credit balance of N6,848.
On investigation, it was discovered that:
i. The opening balance in the cash book for the month had been wrongly brought down as N3,010 instead of N3,100.
ii. Payment of rent N500 had been debited in the cash book.
iii. A customer had paid N1,200 direct into the bank.
iv. The bank had paid on a standing order N600 to an insurance company
v. A cheque for N1,740 deposited in the bank on 25th May, 2022 was credited until 3rd June, 2022.
vi. Cheques paid to suppliers totaling N3,750 had not been presented for payment.
vii. Cost of cheque book and other charges by bank totaling N180 had not been entered in the cash book.
viii. The bank had paid a cheque of N1,360 in error from Feyikogbon `s Account.
You are required to prepare:
(a) Adjusted Cash Book for the month of May 2022.
(b) Bank Reconciliation Statement as at 31st May, 2022.
4. The following was the cash book (bank column) of Odebeodero Nigeria Limited for the month of May 2022:
|
CASH BOOK ( BANK COLUMN) FOR THE MONTH OF MAY 2022 |
|||
|
N |
|
N |
|
|
Balance 01/05/2022 |
4,020 |
Favour-Cheque No. ABX |
1,210 |
|
Adetutu-Cheque No. 102 |
1,340 |
Frank-Cheque No. AXY |
420 |
|
Bassey - Cheque No. 12X |
670 |
Mary- Cheque No. X2 |
260 |
|
Cynthia - Cheque No. 2B1 |
2,450 |
Salaries |
14,000 |
|
Cash |
1,540 |
Purchases |
1,100 |
|
Sales |
6,000 |
Samuel- Cheque No. 001 |
624 |
|
Balance 31/05/2022 |
1,594 |
|
|
|
17,614 |
|
17,614 |
|
|
Balance 01/06/2022 |
1,594 |
||
Upon investigations, it was discovered that:
i. Bank Charges of N100 reflected on the bank statement have not been posted into the cash book.
ii. Cheque No. 2B1 for N2,450 was dishonoured on presentation. No entry has been effected to reflect the dishonour.
iii. The opening balance in the cash book should have been N4,200.
iv. The bank has settled a standing order of N1,200 payment to insurance company.
v. All cheques issued and receipts have been paid and credited by the bank respectively except the following:
1. Cheque No. 12X N670
2. Cheque No.001 N624
3. Cheque No.ABX N1,210
4. Cheque No.X2 N260
vi. The bank statement shows an overdrawn balance of N3,740.
Required:
(a) Revised cash book entries of Feyikogbon Nigeria Limited for the month of May 2022.
(b) Bank Reconciliation Statement as at May 31, 2022.
Click the link below:
BRIEF LECTURE NOTE ON ACCOUNTING CONCEPTS:;
https://objunityonlineclasses.blogspot.com/2022/10/brief-lecture-note-on-accounting.html
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