Question 6

Enumerate the steps to ascertain the correct cash book balance.


The following steps will be followed to ascertain the correct cash book balance

i) The first step is to put the balance of the pass book as the starting point Showing balance as per pass book.
ii) The cheques deposited but not yet collected are added.
iii) All the cheques issued but not yet presented for payment,amounts directly deposited in the bank account are deducted.
iv) All the items of charges such as interest on overdraft,payment by bank on standing instructions and debited by the bank in the pass book, but not entered in the cash book, bills and cheques,dishonoured etc are added.
v) All the credits given by the bank such as interest on dividends collected etc and direct deposits in the bank are deducted
vi) Adjustments for errors are made according to the principles of rectification of errors.
vii) Now, the net balance shown by the statement should be the same as shown by the cash book.

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