ZIMSEC O Level Principles of Accounts Notes: Bank Reconciliation Statement Overdraft Example
- We have looked at the process of preparing bank statements here
- We also looked at an example here
- However we have made the distinction between a debit bank balance an an overdrawn account
- We will now look at an example of how to prepare a bank statement when the account is overdrawn
The following is the cash book (bank columns) of F Kureva for December 20X7:
| Dr | Cash Book | Cr | ||||
| Date | Details | Amount($) | Date | Details | Amount($) | |
| Dec 6 | P Paradza | 230 | Dec 1 | Balance b/d | 1900 | |
| Dec 20 | C Choto | 265 | Dec 10 | J Ranganai | 304 | |
| Dec 31 | W Banda | 325 | Dec 19 | P Moyo | 261 | |
| Dec 31 | Balance c/d | 1682 | Dec 29 | K Chatindo | 37 | |
2502 | 2502 |
The bank statement for the month is as follows:
| 20x7 | Dr($) | Cr($) | Balance($) | |
| Dec 1 | Balance | 1900 O/D | ||
| Dec 6 | Cheque | 230 | 1670 O/D | |
| Dec 13 | J Ranganai | 304 | 1974 O/D | |
| Dec 20 | Cheque | 265 | 1709 O/D | |
| Dec 22 | P Moyo | 261 | 1970 O/D | |
| Dec 30 | T Mufore: Standing Order | 94 | 2064 O/D | |
| Dec 31 | F Ramba: ZIPIT | 102 | 1962 O/D | |
| Dec 31 | Bank charges | 72 | 2034 O/D |
Required:
- Write the cash book up to date to take the necessary items into account, and
- Draw up a bank reconciliation statement as on 31 December 20X7
Solution
- Here is what the updated cash book should look like
| Dr | Cash Book (Updated) | Cr | ||||
| Date | Details | Amount($) | Date | Details | Amount($) | |
| Dec 6 | P Paradza | 230 | Dec 1 | Balance b/d | 1900 | |
| Dec 20 | C Choto | 265 | Dec 10 | J Ranganai | 304 | |
| Dec 31 | W Banda | 325 | Dec 19 | P Moyo | 261 | |
| Dec 31 | F Ramba | 102 | Dec 29 | K Chatindo | 37 | |
| Dec 31 | Balance c/d | 1746 | Dec 30 | T Mufore | 94 | |
| Dec 31 | Bank Charges | 72 | ||||
2502 | 2668 |
- Now the reconciliation statement
| Bank Reconciliation Statement as at 31 December 20X7 | $ |
| Overdraft as per Cash Book | (1746) |
| Add Unrepresented cheques: K Chatindo | 37 |
| (1709) | |
| Less uncredited lodgments: W Banda | (325) |
| Overdraft/Balance as per bank statement | (2034) |
- As you can clearly verify the obtained bank balance at the end is similar to the balance shown on the bank statement
- You can consider the two balances to be reconciled at this stage
To access more topics go to the Principles of Accounting Notes.
