Page 266 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes
Self Assessment
Fill in the blanks:

6. Overdraft means ……………………… balance.
7. The balance of cash book is ……………………… in case of overdraft.
8. Bank charges will ……………………… in case of overdraft as per Cash Book.
9. Cheques issued but not encashed will ……………………… in case of the overdraft as per
Pass Book.
10. Interest allowed by bank …………………… in case of the favourable balance of cash book.

11.3 Summary

 The bank reconciliation statement is prepared as on a particular date to reconcile the
differences between the check books and pass book by identifying the causes of difference
and showing their impact.

 There are a lot of reasons due to which the balances of a cash book and pass book do not
match, and then the bank reconciliation statement is prepared to reconcile both the balances.

 The bank reconciliation statement facilitates checking of errors and frauds in the books of
accounts.

11.4 Keywords

Bank Overdraft: If the bank statement shows a debit balance at a particular point of time, it is
known as overdraft. It implies that the account is overdrawn, i.e., withdrawals are more than
deposits.
Bank Statement: It gives the details of transactions between the bank and the customer. Every
bank provides bank statements to each customer either weekly or monthly.
Pay-in-Slips: Documents supporting cheques deposited into the bank.

11.5 Review Questions

1. What is a Bank Reconciliation statement?

2. Why is a bank reconciliation statement prepared?
3. What are the causes of differences between the bank balance shown by cash book and the
balance shown by bank statement?

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