Account 1 Marks Question

Cheques issued but not presented for payment are not recorded in an amended cash book because they will be ultimately presented for payment in the bank.

Yes, ₹ 9,000 will be recorded on the debit side of amended cash book.

Cheques deposited have been recorded on the debit side of bank column of cash book. Since they will never be recorded in pass book due to their dishonour, the entry in the cash book must be reversed and hence should be recorded on the credit side of amended cash book.

Causes of Differences in the Cash Book and Pass Book Balance.The difference may arise on account of the following reasons:

1. Differences caused by Time gap in recording transactions.
2. Differences caused by errors committed in recording transactions.

1. Differences caused by Time gap in recording transactions.

Quite often the difference between the Cash Book and Pass Book balance is caused by the time gap in recording the transactions. The reasons for time gap are as follows:

1. Cheque issued but not yet presented for payment in the Book: When a cheque is issued to a creditor by the firm, it is immediately recorded on the credit side of the bank column of the cash book. But the bank will debit the firm's account only when this cheque is actually presented to the bank for payment. Generally, there is a gap of some days between the issue of a cheque and its presentation to the bank. In the case of crossed cheques, the time lag is very high since such cheques can be presented for payment only through some bank. Thus, until the cheques are presented for payment, the cash book will show a reduced balance in comparison to the pass book.
2. Cheque paid into the bank for collection but not yet credited by the Bank: When a firm receives cheques, drafts etc. from its customers, "hey are immediately deposited into bank for collection and an entry is made on the debit side of the bank column of the cash book. But the bank will credit the firm's account only when it has actually collected the payment of these cheques from other banks. Again there will be a gap of some days between the depositing of the cheques into the bank and credit given by the bank. In the case of outstation cheques, this gap will be very high. Thus, until the cheques are collected and credited by the bank, the cash book will show an increased balance in comparison to the pass book.
3. Cheque paid into the bank for collection but dishonoured by the bank: When the cheques received from outside parties are deposited with the bank, these are immediately recorded on the debit side of the bank column of the cash book, but if the cheques are dishonoured, bank will not make any entry in the credit of customer's account. As a result, the cash book will show an increased balance in comparison to the pass book.

2. Differences caused by errors committed in recording transactions.

Sometimes the difference between the Cash Book and Pass Book balance may arise due to errors committed in recording transactions in the Cash Book or in the Pass Book. Hence, such errors may be of two types:

1. Errors committed in recording transactions by the firm: Sometimes the firm may commit errors while recording entries in the Cash book. Such errors may be:

1. Cheque issued to a creditor but omitted to be recorded in the Cash Book.
2. Cheques deposited into the bank but omitted to be recorded in the Cash Book.
3. Error in totalling or balancing the bank column of the Cash Book.

2. Errors committed in recording transactions by the bank: Sometimes the bank commits an error and records a wrong entry in the customer's account which causes a difference between the bank balance shown by the cash book and the balance shown by the pass book.

Overdraft balance shown by the bank column in the cash book of Mr. Vivek is ₹ 45,000. Prepare Bank Reconciliation statement as on December 31, 2017:

1. A bill receivable for ₹ 5,000 previously discounted with the bank had been dishonoured and debited in the pass book.
2. Interest on investment collected by the bank and credited in the pass book ₹ 1,500.
3. Cheques deposited into bank but not yet collected ₹ 7,500.
4. Interest charged by the bank on overdraft balance ₹ 1,850.
5. Cheques issued but not yet presented for payment ₹ 11,350.
6. Received a payment directly from a customer into bank account ₹ 12,500.
7. Cheques recorded in the cash book but not sent to the bank for collection was ₹ 17,500.
8. Bank charges debited as per pass book ₹ 500.

When we start with the Cr. Balance (Overdraft) as per Cash Book answer will be Dr. Balance (Overdraft) as per pass Book.

No. The mistake will be rectified by the bank it self.

Bank Reconciliation Statement is prepared for the following reasons:

1. To ensure that the amount of cash reported on the company’s balance sheet is the correct amount. The additions and deductions on the bank statement are compared with the items that are entered in the company’s general ledger cash account. If there are any differences made such as outstanding cheques and uncredited cheques, it will be noted as simply timing differences.
2. To detect the missing transactions which are not entered in the cash book.
3. To identify the data entry errors in a cash book.
4. To ensure that all transactions which have been recorded in your bank statements are accurate.
5. To identify the bank errors which is made by bank personnel.
6. To identify the dishonoured cheques.
7. To identify the stale cheques Cheque presented at the bank after six months of its payment date.
8. To detect frauds and the misappropriation of funds.
9. To ensure the financial review.

1. Plus.
2. Minus.
3. Plus.
4. Minus.
5. Plus.
6. Minus.
7. Minus.

Note: When it is not clearly stated in the question whether the Cash Book balance g vent the start is a debit or a credit balance, it will be treated as a debit balance.

1. Plus.
2. Minus.
3. Plus.
4. Minus.
5. Plus.

1. Plus.
2. Minus.
3. Minus.
4. Plus.

1. Minus.
2. Minus.
3. Minus.
4. Plus.

Cheques deposited into bank are already correctly recorded in the cash book. As soon as they are collected by bank, they will be recorded in pass book also.

1. Cheques issued or drawn but not yet presented for payment.
2. Interest allowed by bank not recorded in Cash Book.

1. Cheques issued or drawn but not yet presented for payment.
2. Amount directly deposited by the customers in our bank account.

1. Cheques issued or drawn but not yet presented for payment.
2. Interest allowed by bank not recorded in Cash Book.

1. Cheques paid into bank for collection but not yet cleared by bank.
2. Bank charges and commission charged by bank.

1. Cheques paid into bank for collection but not yet credited by bank.
2. Direct payment made by the bank according to the standing instructions of Customers.

Bank reconciliation statement is a statement prepared mainly to reconcile the difference between the ‘Bank Balance shown by the Cash Book and Bank Pass Book.

Debit balance in Pass Book means overdraft.

A bank reconciliation statement locates the errors or omissions that may have been committed either on the part of the customer or the bank. The error's so detected can be rectified accordingly.

1. Cheques paid into bank for collection but not yet credited by bank.
2. Direct payment made by the bank according to the standing instructiors of customers.

Cash Book Cr. Balance and Pass Book Dr. Balance.

1. Cheques paid into bank for collection but not yet credited by bank.
2. Bank Charges and cornmission charged by bank.

1. Cheques issued or drawn but not yet presented for payment.
2. Amount directly deposited by customers in our bank account.

1. Cheques deposited into bank but not yet credited by bank.
2. Cheques issued but not yet presented for payment in the bank.

1. Cheques issued but not yet presented for payment in the Bank.
2. Cheques paid into the bank for collection but not yet credited by the Bank.