Book-keeping, Cash & Bank Transactions, Reconciliation and Stores/Inventory Accounting
Book-keeping, Cash and Bank Transactions, Reconciliation and Stores/Inventory Accounting tests recording, control and valuation. Expect practical questions on cash book, BRS and store records.
Cash and bank
- Cash book is both journal and ledger; a contra entry affects cash and bank and is marked 'C'.
- Petty cash imprest: a fixed float is reimbursed for the amount spent.
- Bank reconciliation explains the difference between cash book and pass book balances.
Causes of difference
- Cheques issued but not presented; cheques deposited but not credited.
- Bank charges, interest, direct debits and credits.
- Errors by the business or the bank.
Stores and inventory
- GRN records receipt; bin card records quantity; stores ledger records quantity and value.
- FIFO issues oldest stock first; weighted average smooths price changes.
- Physical verification checks records against actual stock.
Worked example
Cash book shows ₹10,000 debit. Cheque issued ₹2,000 not presented; cheque deposited ₹1,500 not credited; bank charges ₹100. Pass book balance = 10,000 + 2,000 − 1,500 − 100 = ₹10,400. The unpresented cheque means the bank still shows more money; the uncredited deposit and charges mean the bank shows less.
Traps
- Reversing the signs in BRS.
- Treating a contra entry as a business expense.
- Using FIFO and weighted average interchangeably in a rising-price market.
- Recording value in a bin card.
- Forgetting that bank charges reduce the cash book balance only after adjustment.