By S.K Chik
Introduction
• At each given date, our banker should
send us a statement which shows the
details of our bank transactions during a
particular period and the balance at that
date. We call this statement the “bank
statement”
• Theoretically, our company’s bank account
in the cash book column should have the
same transactions and balance as
recorded by the bank statement.
• The only difference is that the former is
prepared by our firm while the latter is
done by the banker
• However, in practice, the balance from the
bank statement seldom agrees with the
balance from the bank account in the cash
book.
Reasons for differences
1. Bank interest and commission
The banker calculates these charges, the
amount will first appear on the bank
statement and cannot be entered into the
cash book until the statement is received.
2. Uncredited Cheques
Some cheques that we have received but not
yet deposited or deposited but not yet
credited on the bank statement because the
cheques have not been ”cleared”
3. Unpresented Cheques
Cheques issued sent to creditors have been recorded
in the cash book but they have not been presented to
the bank for payment, so the corresponding entry in
the bank statement may not appear until several days
later.
4. Autopay – Standing Orders and Direct debits
The banker pays regular amounts on behalf of our
company, this amount paid will first appear on the bank
statement at the appropriate date, but may not have
been entered in the cash book.
5.Credit transfer
Sometimes debtors may not send us the cheques for
settlement but directly deposit money into our bank
account. (e.g. EPS) This amount received will first
appear on the bank statement and cannot be entered
into the cash book until the bank statement is received.
6. Dishonored/ Returned Cheques
7. Errors made by the banker or by the
company
Adjustments
• We should adjust the balance of cash
book in order to agree the balance of bank
statement
• The difference that cash book has not
been entered the transactions of Bank
interest, Standing orders, Direct debits,
Credit transfer and dishonored Cheques
should be adjusted in Cash book
ITEMS
ENTRIES ALREADY MADE CORRECTION
REQUIRED ON
ON
CASH BOOK
CASH BOOK
BANK
STATEMENT
1. Unpresented
Cheque
Credited
None
2. Uncredited
cheque
Debited
Not yet
entered
Not yet
entered
3. Credit
transfer
Not yet
entered
Not yet
entered
Credited
debit
Debited
Credit
Not yet
entered
Debited
Debited
Credit
returned
Credit
4. Standing
Order
5. Bank
Charges
6. Dishonored
cheque
None
Cash Book (Bank)
20X6
$
Jan 25 Balance b/ f
100
28 Sales
200
31 Sales
500
20X6
$
Jan 30 Mr. A
50
31 Bal c/ d
700
750
Feb 1
Balance b/ d
750
700
Hong Kong Bank LTD.
Gradeplus Co.
Date
Particulars
20X6
Jan 25
Bank Statement
Withdrawals (Dr.) Deposits (Cr.)
$
Balance
$
Balance b/ f
$
130 (Cr.)
26
Cheque #901
30
28
Cash deposit (sales)
20
30
Cash deposit (Mr. B)
150 270 (Cr.)
31
Standing order - rent
40
100 (Cr.)
120 (Cr.)
230 (Cr.)
Cash Book (Bank)
20X6
$
Overstate
Jan 25 Balance
b/ f
d $180
28 Sales
31 Sales
100 
200
500
750
Feb 1
Date
Balance b/ d
Particulars
20X6
Jan 25
Balance b/ f
26
Cheque #901
28
Cash deposit (sales)
30
Cash deposit (Mr. B)
31
Standing order - rent
Unpresented
Cheque
Jan 30 Mr. A
20X6
$
50
31 Bal c/ d
700
Uncredited
Cheque
750
700
Understated
Hong Kong Bank LTD.
balance of $50
Gradeplus Co.
Bank Statement
Withdrawals (Dr.) Deposits (Cr.)
Unpresented
$
$
Cheque
(adjusted)
Standing
Order
40
$
130 (Cr.)
100 (Cr.) 
30
Credit
transfer
Balance
20
120 (Cr.)
150 270 (Cr.)
230 (Cr.)
Adjustments
Cash Book (Bank)
20X6
$
Jan 31 Balance b/ f
31 Credit transfer
31 Understated balance
700
150
Balance b/ d
Jan 31 Standing Order
31 Bal c/ d
$
40
860
50
900
Feb 1
20X6
860
900
Bank Reconciliation Statement
Bank Reconciliation Statement
as at 31 January 20X6
$
860
Balance as per cash book
Add: Unpresented Cheque
$
50
910
Less: Uncredited Cheque
Bank error (understated deposit)
Balance as per bank statement
500
180
(680)
230
Instead of commencing with the cash book balance,
the bank reconciliation statement can commence
with the bank statement balance and end with cash
book balance as follows:
Bank Reconciliation Statement
as at 31 January 20X6
$
230
Balance as per bank statement
Add: Uncredited Cheque
Bank error (understated deposit)
$
500
180
680
910
Less: Unpresenited Cheque
Balance as per Cash Book
50
(50)
860
Example:
At the close of business on 28 February 19X9 the cash book of Mr. Chong
showed a balance of $625 in his bank. The figure differed from the bank
balance as shown on his bank statement. The following matters account for
the difference:
(a) On 28 February 19X9 one of his debtors had paid direct to Mr. Chong’s
banking account the sum of $42. This transaction had not been entered in
the cash book.
(b) During February 19X9 the bank had allowed Mr. Chong interest amounting to
$54 but this had not yet appeared in the cash book.
(c) Certain cheques drawn by Mr. Chong during February 19X9 had not been
presented for payment by the close of business on 28 February 19X9. These
were for $21, $17. $57 and $61.
(d) A standing order for $75 being one quarter’s rent had been paid by the bank
on Mr. Chong’s behalf but this had not yet been entered in the cash book.
(e) During February 19X9, Mr. Chong had paid into his banking account a
cheque for $44 which he had received from a debtor’s bank. The appropriate
entry appeared on the bank statement but not in Mr. Chong’s cash book.
Required:
• Write up the cash book starting with
balance of $625 and draw up the bank
statement but not in Mr. Chong’s cash
book.