Subsidiary Books and Bank Reconciliation Statement
Subsidiary Books and Bank Reconciliation Statement
This domain tests special journals, the cash book, petty cash and the preparation of a bank reconciliation statement (BRS) from cash book and pass book balances.
Core rules
- Purchases book records only credit purchases of goods; sales book records only credit sales of goods. Returns books record goods returned.
- Cash book is both journal and ledger; contra entries appear on both sides when cash is deposited or withdrawn from bank.
- BRS explains differences between the cash book bank balance and the pass book balance caused by timing, errors and items not yet recorded.
Worked example
Cash book shows a debit balance of Rs.15,000. Cheques deposited Rs.4,000 are not yet credited; cheques issued Rs.2,500 are not yet presented; bank charges Rs.200 are not entered in the cash book. Starting with the cash book balance: add cheques issued Rs.2,500, subtract cheques deposited Rs.4,000, and subtract bank charges Rs.200. Balance as per pass book = Rs.15,000 + Rs.2,500 - Rs.4,000 - Rs.200 = Rs.13,300 credit. The charges reduce the bank balance but have not yet reduced the cash book.
Traps
Reversing the treatment of cheques deposited and cheques issued; ignoring a bank overdraft; forgetting contra entries; and treating errors in the cash book as timing differences.