1 Cash Book ( Bank Column Only ) 2006 $ $ Aug1Balance b/f 40 Aug11 G.Wong 25 Aug10 K.Chan 60 Aug23 H.Chik 45 Aug31 Balance c/f Bank Statement Aug5 Balance b/f 40 Cr Dr. Cr. Balance $ $ $ Aug11 G.Wong 25 Aug 10 K.Chan Cr. Example 1~ 75 Cr.

2 1. Should the ending balance of the Cash Book and Bank Statement be the same? 2. Why they should be the same? 3. Can you tell me why there is a difference between their ending balances?

3 Timing differences E.g. A receipt of $50 from A.Lee on Aug 28 were credited by the bank on Sept 3 Omissions and Errors E.g. A payment of electricity fee by the bank of $300 was omitted in the Cash Book

4 ( 1 ) Unpresented Cheques Cheques issued by the firm not presented for payment by the bank. Cash Book (Bank) 2005 $ Dec 31 Furniture 100 Bank Statement 2006 Dr. Cr. Balance $ $ $ Jan 10 Furniture Dr E.g

5 Deposits entered into the Cash Book but not yet appeared on Bank Statement Cash Book (Bank) 2005 $ Dec 30 Sales 100 Bank Statement 2006 Dr. Cr. Balance $ $ $ Jan 2 Sales Cr E.g

6 Payments made directly through the bank Cash Book (Bank) 2006 $ Jan 3 Rates 700 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 20 Rates Dr E.g

7 Charges for banking services made by the bank for the company Cash Book (Bank) 2006 $ Jan 3 Bank Charges 20 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 25 Bank Charges Dr E.g

8 Standing instructions from the firm to make regular payments by the bank Cash Book (Bank) 2006 $ Jan 2 subscriptions 300 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 10 subscription Dr E.g

9 Collection from customers made direct to the bank through the banking system Cash Book (Bank) 2006 $ Jan 2 subscriptions 400 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 17 subscription Cr E.g

10 Cheque deposited into the bank but returned by the bank marked refer to drawer ( i.e. the drawer fails to pay ) Cash Book (Bank) 2005 $ Dec 7 A.Chan 500 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 9 A.Chan Cr E.g Dec 11 A.Chan (Refer to drawer)

11 Interest received from the bank for deposits or fixed deposits into the bank Cash Book (Bank) 2006 $ Jan 2 Interest received 10 Bank Statement 2005 Dr. Cr. Balance $ $ $ Dec 20 Interest received Cr E.g

12 Explain the reasons for differences Identify errors and omissions in the Cash Book and the Bank Statement Make corrections

13 Example 2 Cash Book ( Bank Column Only ) 2006 $2006$ Aug1Balance b/f 40 Aug11 G.Wong 25 Aug10 K.Chan 60 Aug23 H.Chik 45 Aug31 Balance c/f Bank Statement Aug 1 Balance b/f 40 Cr Dr. Cr. Balance $ $ $ Aug 11 G.Wong Cr. Aug 10 K.Chan Cr.

14 Bank Reconciliation Statement as at 31 August 2006 Unpresented cheque : H.Chik 45 Balance in hand as per bank statement 75 Balance in hand as per Cash Book 30 Add $ Bank Reconciliation Statement as at 31 August 2006 Less: Unpresented cheque :H.Chik 45 Balance in hand as per Cash Book 30 $ Balance in hand as per Bank Statement 75

$ $ Dec26Balance b/f 500 Dec27 Y. Chan 100 Dec28 G.Poon 70 Dec29 C.Cheung 25 Dec 31 A.Tang 230 Dec31 Balance c/f Bank Statement Dec 26 Balance b/f 500 Cr Dr. Cr. Balance $ $ $ Dec 30 Y. Chan Cr. Dec 29 Cheque Cr. Exercise1Cash Book Credit Transfer: L.Chung Cr. Bank Charges Cr.

16 Example 3 Cash Book ( Bank Column Only ) 2006$ $ Aug27 Balance b/f 400 Aug28 W.Wong 55 Aug29 T.Pong 50 Aug30 A.Kong 20 Aug30 G.Lee 110 Aug31 Balance c/f Bank Statement Aug 27 Balance b/f 400 Cr Dr. Cr. Balance $ $ $ Aug 30 W.Wong Cr. Aug 29 Cheque Cr. Aug 30 Credit transfer: G.Lau Cr. Aug 30 Bank Charges Cr.

17 What is the amount difference between the Cash Book and the Bank Statement? Answer : $485-$415=$70

18 Credit Transfer Bank interest Debit Cash Book (since not yet entered in Cash Book) Standing Order/ Direct Debit Bank Charges Dishonoured Cheques Credit Cash Book (since not yet entered in Cash Book)

19 Cash Book 2006 $ Aug 31 Balance b/f 485 Aug 31 Bank charges 40 Aug 31 Credit transfer 60 Aug 31 Balance c/f

20 Bank Reconciliation Statement as at 31 August 2006 $ Balance in hand as per Cash Book 505 Add Unpresented cheque :A.Kong Less Uncreditd items 110 Balance in hand as per bank statement 415

21 Bank Reconciliation Statement as at 31 August 2006 $ $ Balance in hand as per Cash Book 485 Add Unpresented cheque :A.Kong 20 Credit transfer : G.Lam Less Uncredited items : G.Lee 110 Bank charges Balance in hand as per Bank Statement 415

22 Bank Reconciliation Statement as at 31 August 2006 $ $ Balance in hand as per Bank Statement 415 Add Uncredited items :G.Lee 110 Bank charges Less Unpresented cheque :A.Kong 20 Credit transfer :A.Lam Balance in hand as per Cash Book 485

23 Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank balance Statement Book Statement balance balance Balance Unpresented 1) cheque 2) Uncredited items 3) Direct debits

24 Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank balance Book Statement 4) Bank charges 5) Standing orders 6) Credit transfer/ direct credits balance balance

25 Dishonoured cheque 8) Interest allowed by the bank Items Effect on Effect on Adjustment Adjustment Cash Book Bank to Cash to Bank balance balance balance 7)

26 Bank Overdrafts (Shown by a credit Balance in the Cash Book) Cash Book 2006 $ Nov1 Balance b/f 300 Bank overdraft Bank Statement 2006 Dr Cr Balance $ $ $ Nov1 Balance b/f 300 O/D

27 Example Cash Book 2007 $ Dec 4 A. Ko X 290 Dec 24 N. Ng X 110 Dec 29 M.Ming 110 Dec 31 B.Tam 103 Dec 31 Balance c/d 199 Dec 1 Balance b/f 522 Dec 5 K.Wong 120 Dec 23 D.Fung 50 Dec 29 A.Co 70 Dec 31 Bank Charges Bank Statement 2007 Dr. Cr. Balance Dec 1 Balance b/f 522 O/D Dec 5 Cheque 290 X 232 O/D K.Wong O/D Dec 24 Cheque 110 X 242 O/D Dec 29 M.Ming: Credit Transfer O/D Dec 29 A.Co O/D Dec 31 Bank Charges O/D $ $ $

28 Answers Bank Reconciliation Statement as at 31 December 2007 Overdraft as per Cash Book 199 $ Less Bank Lodgement not yet entered on Bank Statement Add Unpresented Cheque50 252