Accounting PPT report

Name Roll no.

Group# 5

Saba komal 19011556-056

Maham mazhar ul haq 19011556-068

Afaq ahmed 19011556-048

Abdullah abaid 19811556-009

Zeeshan ahmed 19011556-061

Submitted to: Sir Yasir Nadeem

Class: Bs-IT19(B)

Course: Fundamentals of Accountings

Course code: MGT-204

University of gujrat

Acknowledgment:
First of all, I would like to thank my accounting professor, Sir Yasir

Nadeem, for their guidance. Then I would like to thank my fellow

Maham , abdullah , zeeshan and afaq for their help in this

regards.
Table of content:
1. Dischonor of cheque

2. Bank reconcillation statement

3. Distinction between cash book and pass book

4. What is meant by reconcillation

5. Methods of B.R.S

6. Adjusting entries for reconcillation transuction

Dischonor of cheque
WHAT IS CHEQUE?
A cheque (or check) is a paper used to give money from one person or business to another
person or business. To the person getting the cheque, it is a paper that allows them to go to a
bank and get money. A cheque that is written to a person but does not have the amount of
money written is a blank cheque.

ESSENTIAL CHARACTERISTIC OF CHEQUE:

1. It must be in writing: A cheque must be in writing. An oral order to pay does not constitute a
cheque.

2. It should be drawn on banker: It is always drawn on a specified banker. A cheque can be

drawn on a bank where the drawer has an account, saving bank, or current.

3. It contains an unconditional order to pay: A cheque cannot be drawn so as to be payable

conditionally. The drawer’s order to the drawee bank must be unconditional and should not
make the cheque payable dependent on a contingency. A conditional cheque shall be invalid.

4. The check must have an order to pay a certain sum: The cheque should contain an order to
pay a certain sum of money only. If a cheque is drawn to do something in addition to, or other
than to pay money, it cannot be a cheque. For example, if a cheque contains ‘Pay USD 500 and
a TV worth USD 500 to A‘ it is not a cheque.

5. It should be signed by the drawer and should be dated: A cheque does not carry any validity
unless signed by the original drawer. It should be dated as well.

What is dishonoured of cheque?

A cheque is said to be dishonoured or bounced when it is presented for payment to a bank but
t is not accepted because of some reason or the other.

REASON :-
1) Signature not matching

2) Overwriting in the cheque

3) Cheque has expired
4) Account closed
5) Insufficient funds
6) Payments stopped by the account holder
7) Opening balance insufficient
8) Disparity in the word and figure mentioned on the cheque
 9) Mismatch in the account number
10) Incase of joint account where both signature are required
11) Death of the customer
12) Presenting at the wrong branch

WHAT HAPPEN WHEN CHEQUE IS DISHONORED ?

When the cheque is dishonoured, a 'cheque return memo' is offered by the bank to the payee
stating why the cheque has been bounced. The payee can resubmit the cheque if he believes
that it will be honoured second time. The payee can prosecute the drawer legally if the cheque
is bounced again.

EXAMPLE:

Bank Reconcillation Statement

Bank reoncillation statemnet

the bank also keeps a record of our bank account with the bank statment" and enters into
our account everyday what is paid in and what is drawn out. At the end of any day, the bank
will gladly tell us our bank balance (as per bank record). So two reciprocal accounts are kept
Bank Account (Cash Book ) in books of the depositor and depositor's account in books of the
bank. The balances shown by the two accounts (Bank A/c and Depositor's A/c) should be
equal because when the Balance.

Cash Book means two bank columns on the both sides of two column or three column Cash
Book. It is made up everyday, and we record in it (Bank Columns) all cheques received
from our debtors and all cheques paid or issued to our creditors or suppliers. We shall also
have several contra cntries every month, recording excess cash paid in or cash drawn out
when required for personal or office use. At the end of the month the Cash Book (Bank
Column) is balanced and the result is a bank balance, (as per Cash Book ). Thus the Cash
Book (Bank Columns ) tells us, what is our balance with thc bank on a particular date.

Account is debited (Bank Column of Cash Book is debited), the depositor's A/c is
credited in the bank books and vice versa. In other words, for each transaction opposite
entries are made in two booics. So if the Cash Book (Ba. Column) shows a debit balance,
the depositor's account will show a credit balance and if the Cash Book shows a credit
balance (overdrawn) the depositor's account in bank books .11 show a debit balance

Deposits: Depositer book Bank book

When cash is deposite Debit= bank A/C Debit= cash A/C
into bank
Credit= cash A/C Credit= depositor A/C
Withdrawas: De
bit= cash A/C
When cash withdraawn Debit= depositer A/C
Credit= bankA/C
from the bank Credit= cash A/C

What is meant by reconcillation?

 If there is a dispute between two friends, or they fail to agree about
some matter, die disagreement may temporarily end the friendship
between them. VVhen they become friends again say they have
'reconcile& with one another. Reconciliation is, therefore, resuming of
friendly relations as a result of reasonable explanations between them.

In business we often have sets of figures (balances of Cash Book and

Pass Book) which apparently disagree with one another, but reasonable
explanations for the disagreement will reconcile the two sets of figures
and show that, in fact, both are right.for example

Cash book balaance= Rs.50000

Pass book balaance= Rs.44000

If there is any discrepancy between the balance of Cash Book and

that of Pass Book, the depositor prepares a statement to explain the
causes of discrepncies and to reconcile the two balances. This
statement of explanation is called .Bank Reconciliation Statement

Different causes of disagreement:

Due to timing:-

o Cheque issued but not yet presented for payment.

o Cheque diposited into bank but not yet decalred.

Transaction recorded by bank:-

 o Interest credited by bank but not recorded in cash book
o Bank charges
o Direct payment by bank
o Direct deposit into bank by customer
o Bill collected by the bank on behalf of customer
o Error or omission

Ways to make bank reconcillation statment

Balance as per cash book

Balance as per pass book

Bank reconcillation statement cash book balance

On 31st march 2017 , the bank baance as per ali azam cash book was $17280 debit.

 Cheque for 8400 sent for collection have not been cleard by the bank so far
 Cheque issued but not yet presented for payment $5600.
 There is a debit of $80 in the pass book for bank charges ,but recorded in the cash
book
 Bank has credited $240 for interest in the pass book but these are not recorded in
the cash book.
 A customer deposited $2000 direct in the bank but these were recorded only in the
pass book
 On standing orders of alir azam ,the bank made the following payment by debitting
his accounts:-
o Clube fees $500
o Life insurance premium $2500 these were not recorded in the cash book.
Consider left hand as pass book and right hand as cash book
17280 11480

5,800
Bank reconcillation statement pass book balance

Debit , credit balance,unfavourable , favourable balance , negative , positive

balance , overdraft , deposite balance

Question no#2
 On 31st march 2019 pass book shows a debit balance of $10,000
 Cheque amounting to 8000$ drawn on 25th march of which cheques of 3000$ were
chased within 31st march
 Cheque paid in bank for collection amounted to 5000$ but cheques of $22800 wre
credited on 2nd apri 2019
 Incidental charges $25 charged by the bank
 Dividend collected by bank on our behalf $350
 A cheque for $600 debitted I the cash book omitted to be banked
Balance 22825 15350

Balance as per cash book 7125

 Distinctions Between Cash Book and Pass Book

Definations:

Cash Book:

A book that keeps a record of cash transactions is known as cash book.

There are end number of transactions occur in the normal course of business,
where in receipt or payment is made in cash or cheque. To record these
transactions the entity uses cash book and contains all the details of the
receipts and disbursements that are recorded chronologically.

Pass Book:

 A book issued by the bank to the account holder that records the deposits and withdrawals
is known as passbook. Receipts will be shown in the debit side while payments are entered in
credit side.Passbook is a book issued by the bank to the account holder which records the
amount deposited in/withdrawn from the respective account during a particular period is
tracked. It is a snapshot of customer’s account in the bank’s book. With the help of pass book,
banks inform their customer about the status of their account.
Distinctions

Cash Book Pass Book

1. It is written by the depositor. 1. It is written by the bank but remains in
the depositor's possession.

2. Money deposited is recorded on the 2. Money deposited is entered on the credit

debit side and money withdrawn on side and withdrawn on the debit side.
credit side.

3. A check deposited for collection is 3. It is recorded on the date when it is

recorded on the date of deposit. actually collected from the debtor's bank.

4. A check when issued to a creditor is 4. It is recorded when it is paid by the bank

recorded on the date of issue. to the creditor.

5. Its debit balance shows cash at 5. Its debit balance shows bank overdraft
bank and credit balance shows and credit balance shows cash at bank.
bank overdraft.

Example:

Enter the following transactions in the cash book and pass book:

Jan.
  $
2005

1. Mr. X opened a current account with Standard Chartered Bank. 80,000

3. Paid Mr. N by check. 8,000

5. Received a check from Mr. S and deposited into the bank. 16,000

8. Withdrew from bank for office use. 6,000

10. Paid rent by check. 10,000

14. Bank charges debited by bank 400

17. Paid Mr. Z by check 3,000

Solution:

Cash Book (bank column only)

Particular V/ Particular V/
Date L/F Bank Date L/F Bank
s N s N

1.1.0
Cash A/C   C 80,000 3.1.05 Mr. N A/C   7 8,000
5

  Mr. S A/C   5 16,000 8.1.05 Cash A/C   C 6,000

10.1.0
          Rent A/C   9 10,000
5

Bank
14.1.0
          Charges   11 400
5
A/C

17.1.0
          Mr. Z A/C   13 3,000
5

                  68,600

               

        68,600         68,600

               

Pass Book (A copy of depositor's account in banks ledger)

 Debit Credit Balance
Date Particulars (withdrawals) (deposits)
 
1.1.05 Cash   80,000 80,000

3.1.05 (Mr. N) Check No....... 8,000   72,000

5.1.05 (Mr. S) Check No.......   16,000 88,000

8.1.05 Cash: Check No....... 6,000   82,000

10.1.05 Check No.......paid 10,000   72,000

14.1.05 Bank charges 400   71,600

17.1.05 (Mr. Z) Check No....... 3,000   68,600

         

Conclusion

The bank reconciliation statement is prepared that helps to reconcile the two books as a measure
of internal auditing. The statement also outlines the causes of non-agreement of cash book and
pass book.
Methods of B.R.S (Bank Reconciliation Statement)
There are two methods of preparing B.R.S

1. Single balance method

2. Double balance method
According to the given condition of questions we would come to know that method we have
to use single or double balance method.

Single balance method

One balance is given at a time (cash book or pass book)

(To solve if cash book is given we will start from cash book and get result of pass book
and vice versa)

Example of Bank Reconciliation for single balance method :

Bank Reconciliation Example – 1
1. Balance as per Cash Book RS.10000 as on 31-3-2013

2. Cheque issued RS.20000 but not presented

3. Cheque received RS.15000 and deposited in to bank but not credited

4. Bank charges RS.1000 charged by bank

5. Dishonored cheque RS.5000

6. Dividend received by bank RS.10000

7. Interest credited by bank RS.2000

DrDr = add

Cr Cr =less

Dr Cr = less

Solution
 Name of Account

Bank Reconciliation statement

As on 31-3-2013

Details Debit Credit Amount

Balance as per cash book Dr 10000

Dr 20000
(+) un presented cheque
Dr =30000

(-) uncredited cheque Cr 15000

Dr =15000
(-) bank charges Cr 1000

Dr =14000
(-)dishounerdcheque
Cr 5000

Dr =9000

Dr 10000
(+) dividened received by bank
Dr =19000

(+) interest credited by bank Dr 2000

Dr =21000
 Balance as per pass book Cr. RS=21000

Double balance method

Balances of both are given at a time (cash book and pass book)

(To solve we start with both balancesi.e pass book and cash book and at the end we will get
same result of both balances)

Example of Bank Reconciliation for double balance method :

Bank Reconciliation Example – 2
1. Balance as per cash book RS.10000
2. Balance as per pass book RS.12000
3. Cheque issued but not presented RS.10000
4. Bank charges RS.5000
5. Uncredited cheque RS.4000
6. Interest on Govt. securities RS.1000 received by bank

Solution

Name of Account

Bank Reconciliation statement

As on 31-3-2013

Details Cashbook Passbook

 Dr.10000
Balances Cr.12000

(-)Dr.10000

UnpresentedCheque Dr.10000

(-)Cr.5000 (=) Cr.2000

Bank charges
(=)Dr.5000
(+)Cr.4000
Uncredited cheque

Interest on Govt. securities

(+)Dr.1000

Adjusted Cash Balances (=)Cr.6000

(=)Dr.6000
 Adjusting entries for reconciliation transaction

Adjusting Enteries:
Adjusting enteries are basically made at the end of accounting period. They are used to update
revenue and expense accounts to make sure that expenses are matched to the accounting
period.

Perpose of adjusting enteries:

Accountant record adjusting enteries to ensure the account holder’s record. Match the
bank data. They do so by debiting and crediting financial accounts such as: assets, liabilities,
expenses.

Problem:
The following information were taken from the book of ABC CO, on Dec 31,2016.

1. Balance as per cash book (cr) Rs 26,700.

2. Issued a cheque of Rs 486 to a supplier but wrongly recorded Rs 846 in cash book.
3. Bank collected N/R of Rs 2000.
4. Collection charges of Rs 300, not recorded in CB.
5. A customer cheque for Rs 3000 returned by bank, not recorded in cash book.
6. Bank service charges Rs 300, not recorded in CB.
Solution:

Date Detail PR Debit Credit

Dec 31 Bank 360

A/P 360

Dec 31 Bank 2000

N/R 2000

Dec 31 Collection charges 300

bank 300

Dec 31 A/R 3000

bank 3000

Dec 31 Bank sevice charges 300

Bank 300