PREPARATION OF BANK RECONCILIATION STATEMENT WHEN EXTRACTS OF CASH BOOK AND PASS BOOK ARE GIVEN :

In some instances, students are given extracts from the cash book and the pass book and are required to find out causes of differences and prepare a bank reconciliation statement. In solving such a problem, the following points should be noted:

(i) Heading of the pass book, and

(ii) Period for which cash book and pass book are given.

Heading of the pass book can be given in two ways:

(i) Party in account with bank: It means pass book is a copy of party’s account in the books of bank. Generally, pass book is written in this form. The student should compare debit side of the cash book with credit side/column of the pass book and also compare credit side of the cash book with debit side of the pass book.

(ii) Bank in account with party: It means pass book is the copy of bank’s account (so far as it relates to the party) in the books of bank. In this form the student should compare debit side of the cash book with the debit side/ column of the pass book and credit side with credit side/column.

Practically in such situations, upto date bank statement is obtained and the cash book is amended by incorporating only those transactions in respect of which entries have been made in the pass book. The errors in the cash book are also rectified by suitable entries and thus the upto date bank balance as per cash book is obtained. This balance appears in the balance sheet.

For examination purpose, a reconciliation statement may be prepared after amending the cash book especially if it is mentioned or when the firm prepares reconciliation statement on the date of closing the books of account.