Reconciling a Stubborn Bank Balance
On 31 March 2024 the bank column of M/s Jagannath Traders' cash book showed a debit balance of ₹42,600, while the bank statement showed a credit balance of ₹39,700. The proprietor has already checked additions. Differences found: cheques deposited ₹9,400 were not credited by the bank; cheques issued ₹6,100 were not presented; bank charges ₹350 and bank interest ₹1,250 appear only in the statement; a customer's cheque ₹2,000 was dishonoured but no entry was made in the cash book; the bank wrongly debited the firm ₹1,500 for another customer's cheque; and a cheque of ₹3,000 issued to a supplier was entered twice in the cash book. The accountant wants to know whether the wrong debit should be adjusted in the cash book or shown in the reconciliation, and what balance the firm should carry forward.
1. Prepare the adjusted cash book and the bank reconciliation statement as at 31 March 2024.
Read the worked answer
Adjusted cash book (bank column)
| Particulars | ₹ |
|---|---|
| Balance as per cash book (Dr) | 42,600 |
| Less: bank charges | (350) |
| Add: bank interest credited | 1,250 |
| Less: dishonoured customer cheque | (2,000) |
| Add: cheque entered twice in cash book | 3,000 |
| Adjusted balance | 44,500 |
The duplicate credit of ₹3,000 had overstated payments, so it is added back. The wrong debit of ₹1,500 is not entered in the cash book because it is the bank's error.
Bank reconciliation statement
| Particulars | ₹ |
|---|---|
| Balance as per adjusted cash book (Dr) | 44,500 |
| Add: cheques issued but not presented | 6,100 |
| Less: cheques deposited but not credited | (9,400) |
| Less: bank's wrong debit | (1,500) |
| Balance as per pass book (Cr) | 39,700 |
2. Explain why the bank's wrong debit is not adjusted in the cash book, and why the adjusted cash book balance differs from the pass book balance.
Read the worked answer
The wrong debit is the bank's mistake, not the firm's transaction. The firm has no liability for another customer's cheque, so no cash book entry is made; it is shown as a deduction in the reconciliation until the bank reverses it. The cheque entered twice is the firm's own error, so it must be corrected in the cash book. After correction, the cash book balance is ₹44,500. The pass book still differs because of timing differences - cheques not yet credited ₹9,400 and cheques not yet presented ₹6,100 - and because of the bank's uncorrected wrong debit ₹1,500. Hence the reconciliation explains the gap rather than forcing the two books to agree immediately.