Ascertainment of correct Cash book balance

The following steps will be followed to ascertain the correct cash book balance

i) The first step is to put the balance of pass book as the starting point Showing balance as per pass book.

ii) The cheques deposited but not yet collected are added.

iii) All the cheques issued but not yet presented for payment, amounts directly deposited in the bank account are deducted.

iv) All the items of charges such as interest on overdraft, payment by bank on standing instructions and debited by the bank in the pass book, but not entered in cash book, bills and cheques, dishonoured etc are added.

v) All the credits given by the bank such as interest on dividends collected etc and direct deposits in the bank are deducted

vi) Adjustments for errors are made according to the principles of rectification of errors.

vii) Now, the net balance shown by the statement should be same as shown by the cash book.

Illustration

From the following particulars, ascertain the Bank balance as per Pass Book as on 31st December.

1. The Bank balance as per Cash Book on the date was Rs 11,500.
2. Cheques issued but not cashed before that date amounted to Rs 1,750.
3. Cheques paid into Bank, but not cleared before December amounted to Rs 2,150.
4. Interest on Investments collected by the Bank but not entered in the Cash Book amounted to Rs 275.
5. Local cheque paid in but not entered in the Cash Book Rs 300.
6. Bank Charges debited in the Pass Book Rs 25.

With adjustment in Cash Book:

If the balance at Bank, as per the Cash Book adjusted, it will be Rs 12,050, thus: