Explain the process of preparing bank reconciliation statement with amended cash balance.
While preparing a bank reconciliation statement, under the amended cash balance approach, the balance as per cash book or as per the cash book or as per the cash book means the balance of deposits held at the bank.
Such a balance will be a credit balance as per the pass book.It is also called the favourable balance as per cash book or favourable balance as per pass book. Such a balance exists when the deposits made by the firm are more than its withdrawals. On the other hand, the credit balance as per the cash book indicates bank overdraft.In other words, the excess amount withdrawn over the amount deposited in the bank.It is also known as unfavourable balance as per cash book or unfavourable balance as per pass book.
The following steps will be followed in preparation of the bank reconciliation statement :-
i) The first step is to balance the cash book. The first item in the statement is generally the balance as shown by the cash book.Alternatively, the starting point can also be the balance as per pass book.Considering the balance as per cash book, the following further steps will be followed.
ii) The cheques deposited but not yet collected are deducted.
iii) All the cheques issued but not yet presented for payment directly deposited in the bank account are added.
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 deducted.
v) All the credits given by the bank such as interest on dividends collected etc and direct deposits in the bank are added.
vi) Adjustments for errors are made according to the interest to the principle of rectification of errors.
vii) Now, the net balance shown by the statement should be the same as shown by the pass book.
Popular Questions of Class 11 Accountancy
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Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner. - Q:- Describe the role of accounting in the modern world.
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Differentiate between source documents and vouchers.
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Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order. - Q:-
What is a journal? Give a specimen of journal showing at least five entries.
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Define accounting and state its objectives.
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Enumerate informational needs of management.
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Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.
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The accounting concepts and accounting standards are generally referred to as the essence of financial accounting. Comment.
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Tick the correct answer :
Incomplete record mechanism of book keeping is :
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