Question

What is deducted from the balance per book on a bank reconciliation?

Answer 1

When we have starting balance as cash book

We deduct all those issues whick had reduced the bank balance but had not been included in cash book.

(1) Bank charges ........ debited in pass book but no intimation was made, so cash book remained at higher balance so it is deducted.

(2) Payments made by bank as per our standing orders.......... already debited to pass book but not adjusted in cash book, so deducted.

(3) Cheques deposited but not yet collected............ as soon as a cheque is deposited we might have debited our own cash book, as if it is equivalent to cash. But pass book is not credited until it is collected (cleared). So such cheques increases the cash book so we deduct them to reconcile the balance with pass book.

(4) Dishonour of discounted bills ............ When a bill of exchange is discounted with banker, net proceeds are credited in pass book and debited in our own cash book. But when it is dishonoured ( i.e drawee does not pay that bill) banker will debit our bank balance for full bill amount, thus pass book balance reduces. Now we have to reduce the cash book balance to make it equal to pass book.