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Bank statement and bank column of cash book Bank statement and cash column of cash book Bank column of cash book and cash column of cash book None of the above

Bank Reconciliation Statement
  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    The correct answer is the 1. Bank statement and bank column of the cash book, because it will help the business to verify whether amounts entered and entries recorded are correct or not. It will also help in verifying the balances of bank statements and cash books whether they tally or not. What isRead more

    The correct answer is the 1. Bank statement and bank column of the cash book, because it will help the business to verify whether amounts entered and entries recorded are correct or not. It will also help in verifying the balances of bank statements and cash books whether they tally or not.

    What is Reconciliation?

    Reconciliation is an accounting procedure that compares two sets of records to check figures are correct and in agreement. Reconciliation can also be used for personal purposes.

    What is a Bank Reconciliation Statement?

    A statement showing causes of disagreement between the balance of bank statement and bank column of the cash book at the end of a specific period is called a Bank Reconciliation Statement.

    Steps in preparation of Bank Reconciliation Statement

    Step 1: Comparing items appearing on the debit and credit sides of the bank statement and bank column of the cash book.

    Step 2: Make a list of missed entries.

    Step 3: Analyse the causes of differences.

    Step 4: Select the date for the preparation of the Bank Reconciliation Statement.

    Step 5: Choose the starting point i.e balance as per cash book or balance as per bank statement.

    Step 6: Adjust the starting point by adding or subtracting the missed entries.

    Step 7: Bank Statement must match with the cash book.

    To prepare a bank reconciliation statement a business will need a bank statement from its bank and cash book which it prepares to record entries.

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Bonnie
BonnieCurious
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    To start with let me first explain the difference between receipts and income & payment and expenditure. Although Receipts and Income may look similar terms, there are some differences. Receipts have their relation with both cash and cheques received on account of various items of the organizatiRead more

    To start with let me first explain the difference between receipts and income & payment and expenditure.

    Although Receipts and Income may look similar terms, there are some differences.

    Receipts have their relation with both cash and cheques received on account of various items of the organization. Whereas, income is considered as a revenue item for finding surplus or deficit of the organization. All the receipts collected during the year may not be considered as income.

    For Example, if an organization sale of its assets that is of a capital nature, it would not be considered as an item of income and hence would be treated in the balance sheet.

    Similarly, Payment and Expenditure are two different terms. Payments are those that have their relation with cash and cheques given for various activities of the organization. Whereas, Expenditure is considered as revenue expenditure for ascertainment of surplus or deficit in the case of a not-for-profit organization. All payments made during the year may not be considered as expenditures.

    Differences

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Jayesh Gupta
Jayesh GuptaCurious
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  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    Unfavorable balance as per cash book generally means credit balance in the cash book. This is also known as bank overdraft. Making the above definition more clear, unfavorable balance or bank overdraft means an excessive amount of cash withdrawn than what is deposited in the bank. Simply it is the lRead more

    Unfavorable balance as per cash book generally means credit balance in the cash book. This is also known as bank overdraft.

    Making the above definition more clear, unfavorable balance or bank overdraft means an excessive amount of cash withdrawn than what is deposited in the bank. Simply it is the loan taken from the bank. When there is an overdraft balance the treatment is just the opposite of that of favorable balance.

    Generally for business overdraft occurs when there is immediate or emergency funding for the short term. This can be seen for small and medium-sized businesses. This is considered to be convenient for these businesses because there is no requirement to pay interest on the lump-sum loan, only have to pay interest on the fund you use. Generally linked to an existing transaction account.

    To reconcile this we need to prepare a Bank reconciliation statement. The procedure of preparing BRS under unfavorable conditions is as follows

    • If we start from the cash book balance then “ADD” all the transactions resulting in an increase in the passbook. “DEDUCT” all the transactions that resulted in a decrease in the balance of the passbook. Then the net overdraft balance should be the same as in the passbook.
    • If we start from the balance as per the passbook then “ADD” all the transactions resulting in an increase in the balance of the cashbook and “DEDUCT” all the transactions related to a decrease in the balance of the cash book. The net overdraft balance as per the passbook should reconcile with the cash book.

     

    Let us take one example considering one of the above conditions.

    The cash book of M/s Alfa ltd shows a credit balance of Rs 6,500.

    • A Cheque of Rs 3,500 was deposited but not collected by the bank.
    • The firm issued a cheque of Rs 1,000 but was not presented for payment.
    • There was a debit balance in the passbook of Rs 200 and Rs 400 for interest and bank charges.

     

    Bank Reconciliation Statement

    Particulars Add Deduct
    1. Balance as per cash book 6,500
    2. Cheque issued but not yet presented 1,000
    3. cheque deposited but not yet credited by the bank 3,500
    4. bank and interest charges 600
    Balance as per passbook (overdraft) 9,600
    10,600 10,600
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Karan
Karan
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    Secondary books of accounts are most commonly known as subsidiary books of accounts or day books. They are prepared to record the same type of journals in an ordered manner in a special book. They are nothing, but special journals. Recording all the journals entries in a single journal and these posRead more

    Secondary books of accounts are most commonly known as subsidiary books of accounts or day books. They are prepared to record the same type of journals in an ordered manner in a special book. They are nothing, but special journals.

    Recording all the journals entries in a single journal and these posting them to different ledgers can be very difficult if the number of transactions is huge.

    So, recording the same type of transactions in a special journal proves to be useful in efficient book-keeping and also information retrieval.

    There are eight subsidiary books:

    1. Cashbook – It is three types. (a) Single column cash book – It records only cash receipts and cash payments. (b) Double column cash book – Apart from cash receipts and cash payments, it also records bank receipts and bank payments. (c) Triple column cash book – It additionally records the discount allowed and discount received.
    2. Purchase book – It records all the credit purchases except the purchase of assets.
    3. Sales book – It records all the credit sales except the sale of assets.
    4. Purchase return book – It records all the transactions related to the return of purchased goods.
    5. Sale return book – It records all the transactions related to the return of goods from customers.
    6. Bills receivable book – It records the particulars of all the bills drawn in favour of the business.
    7. Bills payable book – It records the particulars of all the bills drawn in the name of the business.
    8. Journal proper – It records those transactions which cannot be recorded in any of the above-mentioned books. For example, entry related to depreciation charged on assets.

     

    Also, there are a few more things to know:-

    1. Subsidiary books may look like ledger accounts but they are not ledgers. Ledgers are books of final entry and subsidiary books can be said to be the book of intermediate entry and are not but special journals.
    2. Once transactions are recorded in the subsidiary books, they are then posted to the ledgers.
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A_Team
A_Team
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  2. Pooja_Parikh Aspiring Chartered Accountant
    This answer was edited.

    When a company issues shares to shareholders at a price over the face value (at a premium), that amount is termed as securities premium. This amount is transferred to what we call the securities premium reserve. The company is required to maintain a separate reserve for securities premium. UtilizatiRead more

    When a company issues shares to shareholders at a price over the face value (at a premium), that amount is termed as securities premium. This amount is transferred to what we call the securities premium reserve. The company is required to maintain a separate reserve for securities premium.

    Utilization

    Securities premium reserve can be used for the following reasons:

    • Issue of fully paid Bonus share capital.
    • To cover preliminary expenses of a company.
    • For funding the buy-back of securities.

    Since it is not a free reserve, it can only be used for a few specific purposes. The amount received as securities premium cannot be used to transfer dividends to shareholders

    Treatment

    When a company issues shares at a premium, the securities premium reserve account is credited along with share capital as an increase in capital is credited according to the modern rule of accounting.

    For example,
    Sonly Ltd. issues 1,000 shares of $10 face value at $15. Here, the amount of premium would be $5 (15 – 10) per share. Therefore, the journal entry would show:

    Bank a/c (15 x 1,000)        Dr                                                15,000
    To Share Capital (10 x 10,000)                                                             10,000
    To Securities Premium Reserve a/c (5 x 10,000)                                   5,000

    From the above example, we can see that the company receives $15,000, but transfers $10,000 to share capital and the excess $5,000 to securities premium reserve.
    In the balance sheet, this securities premium reserve is shown under the title “Equity and Liabilities” under the head ‘‘Reserves and Surplus”.

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Radha
Radha
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  2. PriyanshiGupta Graduated, B.Com
    This answer was edited.

    Yes, Capital Work in Progress is Tangible Asset. To attain an understanding of the same, we first need to understand what are tangible assets. Assets that have a physical existence, that is they can be seen, touched are called Tangible Assets. Capital work in progress is the cost incurred on fixed aRead more

    Yes, Capital Work in Progress is Tangible Asset.

    To attain an understanding of the same, we first need to understand what are tangible assets. Assets that have a physical existence, that is they can be seen, touched are called Tangible Assets.

    Capital work in progress is the cost incurred on fixed assets that are under construction as on the balance sheet date. Since the asset cannot be used for operation it cannot be classified as a Fixed Asset.

    For example:

    If an asset takes 1.5 years to be constructed as on 1.4.2020 then on the balance sheet date 31.3.2021, the cost incurred on the asset will be classified as Capital Work in Progress.

    Common examples of Capital Work in Progress include immovable assets like Plant and Machinery, Buildings.

    It is shown under the head Non-Current Assets in the balance sheet. Examples of cost included in Capital Work in Progress can be:

    • Advance payment to the contractor
    • Material used/purchased
    • Cost of labor incurred, etc.

    Since the assets under the head Capital Work in Progress are in the process of completion and not completed, hence they are not depreciable until completed. Once the asset is completed it is moved under the head Fixed Assets.

    Capital Work in Progress is shown in the Balance Sheet as:

     

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Aadil
AadilCurious
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  2. Pooja_Parikh Aspiring Chartered Accountant

    Goods and services tax (GST) is an indirect tax that was introduced in place of other indirect taxes like value-added tax, service tax, purchase tax, etc. It was introduced to ensure that only one tax would be applicable all over India. Reverse Charge is a mechanism where the liability to pay tax onRead more

    Goods and services tax (GST) is an indirect tax that was introduced in place of other indirect taxes like value-added tax, service tax, purchase tax, etc. It was introduced to ensure that only one tax would be applicable all over India. Reverse Charge is a mechanism where the liability to pay tax on goods and services lies on the recipient instead of the supplier.

    APPLICABILITY

    Reverse charge is applicable when:

    • It is specified by the CBIC for the supply of certain goods and services.
    • Goods are supplied by an unregistered dealer to a registered dealer.
    • There is a supply of services through an E-commerce operator.

    TIME OF SUPPLY

    As per reverse charge in the case of goods, the time of supply is the earliest of the three:

    • Date of receipt of goods
    • Date of payment
    • The date is immediately after 30 days from the date of issue of invoice from the supplier.

    For example, If goods were received by the supplier on 15th June, and the date of the invoice was on 3rd July but the date of entry in the books of the receiver was 25th June, then the time of supply of goods would be on 15th June.

    As per reverse charge in the case of services, the time of supply is the earliest of the two:

    • Date of payment.
    • Date immediately after 60 days from the date of issue of invoice by the supplier.

    For example, if the date of payment of services provided was on 16th July, and the date of issue of the invoice was on 15th May ( 60 days from 15th May is 14th July), then the time of supply of services would be 14th July.

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