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CSEET · Fundamentals of Accounting · Bank Reconciliation Statement

Mehta & Co. has a bank overdraft of ₹15,000 as per its cash book. A cheque of ₹4,000 issued to a supplier has not been presented, and a cheque of ₹7,000 deposited has not been cleared. There are no other differences. What is the balance as per the bank statement?

The bank statement shows an overdraft of ₹18,000. The unpresented deposit of ₹7,000 has not reduced the bank's overdraft, raising it relative to the cash book, while the unpresented cheque of ₹4,000 has not increased it, lowering it: 15,000 + 7,000 − 4,000.

  1. AOverdraft ₹18,000Correct
  2. BOverdraft ₹12,000
  3. COverdraft ₹26,000
  4. DOverdraft ₹4,000

Explanation

Cash book overdraft of 15,000 is a credit balance. Uncleared issued cheque of 4,000 will increase the bank's overdraft; uncleared deposit of 7,000 will decrease it. Using the bank view: the bank statement overdraft = 15,000 − 4,000 + 7,000 would be wrong; correctly, bank overdraft = 15,000 + 7,000 − 4,000 = 18,000, because the bank has not yet credited the deposit (overdraft higher) and not yet debited the payment (overdraft lower).

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