Balance as per cash book format

The purpose of bank reconciliation is to explain any difference between the bank balance appearing in the cash book of a business and the balance appearing on the bank statement provided by the bank.

When goods are supplied on credit, the supplier will send regular statement menu to the customer, listing the transactions that have taken place and the balance owing at the end of the period. In a similar way, the bank will issue regular statements listing the transactions that have taken place in the period and the balance, which may be either positive or overdrawn, the end of the period.

The bank statement is a copy of the account of the business as it appears in the books of the bank. This is obviously from the viewpoint of the bank. The customer's account will have a credit balance if there is money in the account, as this is the amount the bank owes the customer (a liability of the bank). Where the customer has an overdraft, the account will show a debit balance as this is the amount the customer owes the bank (an asset of the bank). The bank account in the cash book of the business is prepared from the viewpoint of the business, and therefore items will be recorded on the opposite side to that on which they appeared on the bank statement. If a business has money in the bank, the bank account will show a debit balance, as this is the amount the bank owes the business (an asset of the business). Where the business has an overdraft, the bank account will show a credit balance as this is the amount the business on the bank (a liability of the business). The bank statement must be compared with the bank account in the cash book. If the balances differ it is necessary to reconcile them, that is, explain why the differences have arisen.

Reasons for differences between cash book and bank statement
(a) Items in the cash book but not in the bank statement
These are usually due to differences in the time at which items are recorded.
These timing differences are often due to:
(i) cheques not yet presented, which are cheques that have been paid by the business and credited in the cash book, but which do not appear on the bank statement. It will be some time before these cheques pass through the banking system and are deducted from the business's bank account. Until these cheques are debited by the bank, the cash book will show a lower balance than that shown on the bank statement.
(ii) amounts not yet credited, which are cheques and other amounts which have been paid into the bank and debited in the cash book, but which do not appear on the bank statement. These items may not be recorded by the bank for a day or so. Until these items are credited by the bank, the cash book will show a higher balance than that shown on the bank statement.

It is of course possible that there are errors in the cash book which do not appear on the bank statement.
(b) Items in the bank statement but not in the cash book
(i) Amounts received by the bank which have been paid directly into the business's bank account. These include standing orders and credit transfers when a person has instructed their bank to pay an amount of money directly into the bank account of the business. Interest or dividend received may also be paid directly into the business's bank account.
(ii) Amounts paid by the bank to other people. These include credit transfers, standing orders and direct debits which the business has instructed the bank to pay directly from the bank account of the business.

(iii)  Bank charges and bank interest which the bank has taken from the business's account to cover the costs of running the account and for any interest on loans and overdrafts the business may have.

       Dishonoured cheques. These are cheques paid into the bank but which have been returned as the drawer of the cheque did not have sufficient funds to cover the cheque.

Bank errors.

Procedure for bank reconciliation

The procedure may be summarised as follows -
1. Compare the bank statement with the bank account in the cash book. Remember to compare the debit of the bank account against the credit of the bank statement, and the credit of the bank account against the debit of the bank statement. Place a tick (P) against those items which appear in both records.
2. Bring the bank account in the cash book up to date by entering any items which appear on the bank statement but which have not yet been entered in the bank account. Such items may be:
(a) Items debited on the bank statement, e.g. bank charges, standing orders paid, etc. These should be credited in the bank account in the cash book.
(b) Items credited on the bank statement, e.g. credit transfers and standing orders paid directly into the bank. These should be debited in the bank account in the cash book.
3. Correct any errors in the cash book.
4. Balance the cash book. The balance on the bank account is now the true bank balance of the business and this figure will be shown in the Balance Sheet.
5. Prepare the bank reconciliation statement:
(a) Start with the balance shown on the bank statement.
(b) Add on any items that have been debited in the cash book but not yet credited on the bank statement, i.e. amounts not yet credited.
(c) Deduct any items that have been credited in the cash book but not yet debited on the bank statement, i.e. cheques not yet presented,
(d) Make any necessary adjustments for bank errors. Add back any amounts debited in error by the bank and deduct any amounts credited in error by the bank.
(e) The resulting figure should equal the updated bank balance shown in the cash book.

The format of Bank Reconciliation Statement (In case of surplus cash):

Bank reconciliation statement as at …………………

                                                                                                                                                                                                    $                              $

Balance as per cash book                                                                                                                                                                                   xxxx

Add: Unpresented cheques -                     A                                                                                                                       xxxx

                                                                        B                                                                                                                       xxxx                        xxxx

                                                                                                                                                                                                                                 xxxx

Less: Unrealised cheques/Uncredited deposits -                         A                                                                                 xxxx

                                                                                                              B                                                                                 xxxx                       (xxxx)

Balance as per bank statement                                                                                                                                                                           xxxx                                                                                     

The format of Bank Reconciliation Statement (In case of overdraft):

Bank reconciliation statement as at ………………

                                      $                              $

Balance as per cash book (overdraft)                                                                                                                                                               (xxxx)

Add: Unrealised cheques/Uncredited deposits -                       A                                                                                       xxxx

                                                                                                            B                                                                                       xxxx                     xxxx                                                                                                                                                                                                                                                                 xxxx

Less: Unpresented cheques -                     A                                                                                                                           xxxx

                                                                        B                                                                                                                           xxxx                    (xxxx)

Balance as per bank statement                                                                                                                                                                           xxxx

The format of Bank Reconciliation Statement (with Bank Statement Balance):

Bank reconciliation statement as at …………………

                                                                                                                                                                                                        $                             $

Balance as per  bank statement                                                                                                                                                                             xxxx

Add: Unrealised cheques/Uncredited deposits -                   A                                                                                                                          xxxx

                                                                                                         B                                                                                           xxxx                       xxxx

                                                                                                                                                                                                                                     xxxx

Less: Unpresented cheques -                           A                                                                                                                     xxxx

                                                                               B                                                                                                                     xxxx                     (xxxx)

Balance as per cash book                                                                                                                                                                                         xxxx

What is balance as per cash book?

What is the format of cash book?