On March 31, 2017, Rakesh had an overdraft of Rs. 8,000 as shown by his cash book. Cheques amounting to Rs. 2,000 had been paid in by him but were not collected by the bank. He iss... On March 31, 2017, Rakesh had an overdraft of Rs. 8,000 as shown by his cash book. Cheques amounting to Rs. 2,000 had been paid in by him but were not collected by the bank. He issued cheques of Rs. 800 which were not presented to the bank for payment. There was a debit in his passbook of Rs. 60 for interest and Rs. 100 for bank charges. Prepare bank reconciliation statement.
Understand the Problem
The question is asking us to prepare a bank reconciliation statement for Rakesh given specific details of cheques, overdrafts, and debits. We'll need to organize the information and calculate the necessary adjustments to reflect the correct bank balance.
Answer
The adjusted overdraft is Rs. 6,960.
Answer for screen readers
The adjusted overdraft as of March 31, 2017, is Rs. 6,960.
Steps to Solve
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Start with the Overdraft Balance
The cash book shows an overdraft of Rs. 8,000. This represents Rakesh's initial bank balance.
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Adjust for Cheques Paid In but Not Collected
Rakesh has paid in cheques of Rs. 2,000, which the bank has not yet collected. We need to add this amount to the overdraft:
$$ Overdraft = -8000 + 2000 = -6000 $$
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Adjust for Issued Cheques Not Presented
Rakesh issued cheques totaling Rs. 800 that were not presented for payment. This amount will be deducted:
$$ Overdraft = -6000 - 800 = -6800 $$
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Adjust for Bank Charges and Interest
The bank debited Rs. 60 for interest and Rs. 100 for bank charges, which means we subtract these from the overdraft:
$$ Overdraft = -6800 - 60 - 100 = -6960 $$
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Final Calculation of Adjusted Bank Balance
After all adjustments, the adjusted overdraft is Rs. 6,960; however, since it's an overdraft, we state it as such.
The adjusted overdraft as of March 31, 2017, is Rs. 6,960.
More Information
The bank reconciliation statement helps align the cash book balance with the bank's records. In this case, the adjustments include cheques in transit, cheques not yet processed, and bank fees that weren’t recorded in the cash book.
Tips
- Forgetting to adjust the cash book for the bank's fees and interest.
- Not distinguishing between cheques that have been paid in and cheques that have been issued.
- Miscalculating the final balance by not taking into account all adjustments.
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