DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name of the Participant : M. Ramakrishna
Designation : Head of Section
Branch : Commercial & Computer Practice
Institute : Govt. Polytechnic for women,
Bheemunipatnam
Year/Semester : I Year
Subject : Accountancy-I
Sub-code : CCP-102
Topic : Bank Reconciliation Statement
(Overdraft)
Sub Topic : Bank Reconciliation Statement
(Overdraft)
Duration : 100 Minutes
Teaching aids : Power Point Presentation

CCP102.86 1
Recap

In the last classes we discussed about

Preparation of Bank Reconciliation Statement
 Taking the pass book or cash book favourable balance
 Reconciliation of balances after analysis.

CCP102.86 2
Objectives

On completion of this period, you would be able to:

 know the meaning of Overdraft

 need of Overdraft facility
 reasons for disagreement between the Overdraft
balances of cash book and pass book

CCP102.86 3
Structure
 Types of Bank Accounts
 Features of current A/c
 Meaning of Overdraft
 Difference between overdraft and loan
 Procedure for preparation of Reconciliation statement

CCP102.86 4
Known to unknown
 We have prepared bank reconciliation statement
using favourable balance of cash book or pass
book.
 Now, we are going to prepare bank reconciliation
statement using overdraft balance of cash book or
pass book.

CCP102.86 5
What are the types of Accounts?
 Savings Bank Account
 Current Bank Account

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Features of Current Bank Account
1. Opened by business people
2. Provides overdraft facility

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Overdraft
 An agreement entered
by the customer/businessman
 with the banker
 to draw an amount in excess of deposits
 on payment of certain rate of interest
 subject to a predetermined limit


CCP102.86 8
Need of Overdraft facility
 allow to draw excess amount more than
deposits
 to meet short term financial needs in the
business
 besides rising temporary working capital and
 to meet quick financial obligations

CCP102.86 9
Difference between Loan and
Overdraft
 If we secure a loan
 whole amount has to be withdrawn
 not permitted to draw the amount again & again
But
 Overdraft is a credit facility
 to draw amounts repeatedly
 as and when need arises
 can be repaid by depositing cash and cheques

CCP102.86 10
Overdraft can be called as
unfavorable balance
 Pass Book unfavorable balance: Debit balance
 Cash Book unfavorable balance: Credit balance
 The Overdraft balance shown by pass book &
Cash book should be the same
 Nature of the overdraft balance will just be the
opposite
 But in practice, they seldom agree

CCP102.86 11
The reason being:

 Time gap between recording of transactions

CCP102.86 12
What is the procedure or preparation of
Bank Reconciliation Statement (Overdraft)

 Statement prepared on a particular date

 taking cash book overdraft or pass book overdraft
balance as starting point
 comparing the entries in pass book & cash book
 reconciling the entries by Add or Less to
the given book balance
 finding out the balance of pass book overdraft/cash
book balance

CCP102.86 13
Causes for disagreement between the
Overdraft balances of cash book & pass
book

CCP102.86 14
Cheques issued, but not presented for
payment

 Trader issues cheques

 credits cash book
 before the date of payment
 banker debits pass book
 on the actual date of payment only

CCP102.86 15
By comparing the entries with the
Cash Book & Pass Book

 Cash Book shows - higher Overdraft balance

 Pass Book shows - lower Overdraft balance

CCP102.86 16
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Cash Book Overdraft balance - Less

 Pass Book Overdraft balance - Add

CCP102.86 17
Cheques sent to collection, but not
credited

• Outstation & crossed cheques

• sent to bank
• trader debits cash book
• before the collection date
• banker records only after collection

CCP102.86 18
By comparing the entries with the
Cash Book & Pass Book

 Cash Book shows - lower Overdraft balance

 Pass Book shows - higher Overdraft balance

CCP102.86 19
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Cash Book Overdraft balance - Add

 Pass Book Overdraft balance - Less

CCP102.86 20
Bank charges debited in Pass Book
only

 Banker debits pass book for the services rendered

called bank charges
 the trader credits cash book
 only after receiving information

CCP102.86 21
By comparing the entries with the
Cash Book & Pass Book

 Pass Book shows - higher Overdraft balance

 Cash Book shows - lower Overdraft balance

CCP102.86 22
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Pass Book Overdraft balance - Less

 Cash Book Overdraft balance - Add

CCP102.86 23
Interest on Overdraft debited in
Pass Book only

 Banker charges interest on Overdraft

 banker debits pass book
 trader credits cash book
 only after receiving information

CCP102.86 24
By comparing the entries with the
Cash Book & Pass Book

 Pass Book shows - higher Overdraft balance

 Cash Book shows - lower Overdraft balance

CCP102.86 25
Reconciling the Overdraft balances
in Bank Reconciliation Statement,
if start with

 Pass Book Overdraft balance - Less

 Cash Book Overdraft balance - Add

CCP102.86 26
Cash/Cheques directly deposited by
customers

 Direct deposits
 by debtors of the trader
 banker credits pass book
 trader debits cash book
 only after receiving information

CCP102.86 27
 By comparing the entries with the
Cash Book & Pass Book

 Pass Book shows - lower Overdraft balance

 Cash Book shows - higher Overdraft balance

CCP102.86 28
 Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with
 Pass Book Overdraft balance - Add
 Cash Book Overdraft balance - Less

CCP102.86 29
Amount collected & Credited in
Pass Book only

 In execution of the instructions of the

Customers/Trader
 Banker collects
Interest, Commission & Dividends etc.,
 Credits the account
 Trader debits cash book
 Only receiving information

CCP102.86 30
By comparing the entries with the
Cash Book & Pass Book

 Pass Book shows - lower Overdraft balance

 Cash Book shows - higher Overdraft balance

CCP102.86 31
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Pass Book Overdraft balance - Add

 Cash Book Overdraft balance - Less

CCP102.86 32
Cheques received debited in Cash Book
but omitted to sent to bank

 Cheques received
 trader debits the cash book
 but not sent to bank

CCP102.86 33
By comparing the entries with the
Cash Book & Pass Book

 Cash Book shows – lower Overdraft balance

 Pass Book shows - higher Overdraft balance

CCP102.86 34
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Pass Book Overdraft balance - Less

 Cash Book Overdraft balance - Add

CCP102.86 35
Cheques sent to collection but
dishonoured

 Cheques deposited
 trader debits cash book
 but dishonoured

CCP102.86 36
By comparing the entries with the
Cash Book & Pass Book

 Cash Book shows – lower Overdraft balance

 Pass Book shows - higher Overdraft balance

CCP102.86 37
Reconciling the Overdraft balances in
Bank Reconciliation Statement,
if start with

 Cash Book Overdraft balance - Add

 Pass Book Overdraft balance - Less

CCP102.86 38
Summary

In this class, we discussed about

• the meaning of Overdraft
• the need of Overdraft facility
• the reasons for disagreement between the Overdraft
balances of cash book and pass book

CCP102.86 39
Quiz
State whether the following statements are
True or False
1. Cheques sent but not collected by Bank is to be
added when O.D Balance as per cash Book is
given
2. Bank charges debited is pass Book only is to be
added in preparation of B.R.S when O.D Balance
as per cash book is taken as starting point
 Bank directly collected dividend on shares the
amount is to added when Cash book O.D.
balance is taken as starting point
Answers: 1. True 2. True 3. False
CCP102.86 40
Frequently Asked Questions

3. What is Bank Over draft

4. Mention any four Transactions which
cause difference between Balance as per
cash Book and Pass book

CCP102.86 41