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Hi.. i need help in bank reconciliation.. can anyone please tel me when to add and less unpresented cheques and when to add and less unclear lodgements.. ? i am so confused .. i want to know when exctly we need to reverse the working of reconciliation. in dr or crdt condtion of cash book and bank statement.?.. and please answer this question
Q: bank statement shows a blance of 200$dr
bank charges of 2340 not been entered in the cash book
direct debit of 250
bank error $97 being debited to our account due to an other person
unclear lodgements 890
what is the final blance in the cash book after adjustments
a: 465$ dr
b: 465$cr
c: 63$cr
d: 63$dr
please explain this why we less unpresented cheques and add unclear lodgements even our bank statement blance is dr because from my point of view dr blance on bank statement is a cr for us in the cash book and thats why we have to reverse the working and changing every figer from add to less ? please help me sir explain it to meand is it compulsory to add – minus sign before calculating the answer when blance is cr ?
It does not matter about + or – signs, what matters is that you understand what is happening and that you adjust the balance on the bank statement the correct way.
Have you watched my free lecture on bank reconciliations?
Unpresented cheques are always cheques that we are paying. They have been entered in the cash account (correctly) but have not yet appeared in the bank statement. In the bank reconciliation therefore they will always reduce the balance on the bank statement (or increase the overdraft if the balance is overdrawn).
Uncleared lodgements are receipts that have been entered in the cash account, but have not yet appeared on the bank statement. So in the bank reconciliation, the will increase the balance on the bank statement (or reduce the overdraft if the balance is overdrawn).You must have mistyped the question you have typed out (or missed out part of the question). Are you sure that it asks for the balance in the cash book after adjustments (and not before adjustments)? Are you sure that there are no unpresented cheques mentioned?
Because as you have typed it, none of the possible answers are correct!
The balance on the bank statement is 200 overdrawn.
The bank has made an error and charged us 97 when they should not have done. When we correct for this, the overdraft should only be 200 – 97 = 103.
There are uncleared lodgements – receipts not yet on the bank statement – of 890.
When these eventually appear on the bank statement, the overdraft will be cleared and we will end up with a credit balance of 890 – 103 = 787 on the bank statement.Therefore the correct final balance on the cash account will be 787 DR.
(at the moment the cash account balance will be different because they have not entered bank charges and not entered the direct debit. However, after adjustments (so after correcting) it should end up at 787 DR.
Well that will make a difference 🙂
In my previous answer we got as far as having a balance of 787. The unpresented cheques will reduce the bank balance by 1250 which will turn it into an overdraft of 1250 – 787 = 463.
So the correct balance in the cash account is 483 overdrawn, or 483 CR
Hey, what about those 2340 bank charges that have not been entered in the cash book? How come they are ignored in the calculation? Shouldn’t they reduce the cash account?
The correct cash book figure will be the same as the adjusted bank statement balance.
The question gives the current balance on the bank statement, and so we need to get the adjusted bank balance (and the bank charges are on the bank statement already).
That balance will then be equal to the correct balance on the cash account.
Bank charges should indeed be entered in the cash account, and the current cash account balance will therefore be wrong. But we don’t know what the current cash account balance is, so we cannot do anything with it!!
Sir do you have any short trick ? I got confused eveytime with the names of cheques i.e Uncleared cheques , outstanding cheques , outstanding lodgements.
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