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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Bank column of Sharma Traders' cash book shows an overdraft of Rs 12,000. Cheques issued of Rs 7,000 have not been presented for payment, and cheques deposited of Rs 4,000 have not been cleared. No other differences exist. What is the balance as per the bank statement?

The bank statement shows an overdraft of Rs 9,000. Starting from the cash book overdraft of Rs 12,000, unpresented cheques of Rs 7,000 reduce the overdraft, and uncleared deposits of Rs 4,000 increase it, giving 12,000 - 7,000 + 4,000 = Rs 9,000.

  1. AOverdraft Rs 15,000Correct
  2. BOverdraft Rs 9,000
  3. COverdraft Rs 8,000
  4. DOverdraft Rs 5,000

Explanation

Take overdraft as negative: cash book = -12,000. Add back unpresented cheques issued (+7,000) giving -5,000, since the bank has not yet deducted them... check direction: bank has not deducted them, so bank balance is higher: -12,000 + 7,000 = -5,000. Then uncleared deposits: bank has not added them, so bank balance is lower: -5,000 - 4,000 = -9,000. So the bank statement shows an overdraft of Rs 9,000; Rs 15,000 results from reversing both signs.

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