Petty Cash Book:

The word Petty means small. This book is used to record

items like entertainment expenses, cartage, office
expenses, postages, telegrams, stationary , traveling
expenses etc. The person who maintains this book is
called the “petty cashier”
Continue:
 Petty cashier is appointed by the chief cashier. The
chief cashier advances the sum of money to the petty
cashier to enable him to meet petty expenses for a fixed
period.
 The petty cashier will record this amount on the debit
side of petty cash book and chief cashier will record the
amount on the credit side of main cash book.
Continue:

 Difference between the main cash book and petty cash

is that only petty expenses are recorded in the petty
cash book.
IMPREST System:
 Under this system the total petty expenses for a
particular period are estimated and the amount is
advanced by the Chief cashier to the petty cashier. This
is called imprest cash.
 On the expiry of the fixed period the petty cashier
prepare the statement of Petty expenses and submit it to
Chief Cashier.
Continue:
 The Chief Cashier examines the statement and if he
finds it correct, hands over the petty cashier an amount
equal to the amount actually spent. This amount plus
the amount lying with the petty cashier will be equal to
the imprest cash.
Example:
 From the Following particulars prepare the petty cash book
under the imprest system:
 2014 RS
 Jan.1 Received from Chief cashier as imprest cash 400
 .2 Paid taxi hire 20
 .3 Paid postage Rs 28 and stationary Rs 60
 .4 Purchased Stationary 48
 .5 Paid Telegram Chg Rs 28 and bus fare Rs 4
 .6 Bought Postage stamps 96
 .7 paid Rs 72 for repairs of type writer
Bank Reconciliation
Statement:
 In business we keep our “Bank Account” record in the
cash book triple column cash book or double column
cash book. Thus cash book tells us what is our balance
with the bank on a particular date.
 In the same way bank also keeps record of our bank
account with the title called “depositors Account”
Continue:
 In “depositor’s Account” bank record what is paid in
and what is drawn out.
 Two Accounts are kept
 Bank Account(Cash book)
 Depositor’s Account: in the books of Bank
Continue:
 The balance shown by two accounts( Bank Account
and Depositor’s Account) should be equal because
when the bank Account is debited the depositors
Account is credited.
 For each transactions opposite entries are made in two
books.
Continue:
 When cash is deposited into bank:

Bank Book Depositor’s Book

Debit= Bank Debit=Cash

Credit= Cash Credit= Depositors A/C
Pass Book:
 A copy of depositor’s account is provided by the bank
to the depositor after suitable intervals which is called
pass book.
 Sometimes instead of providing a Pass book to the
depositor at certain intervals usually month the bank
send each depositor a bank statement.
Bank Statement:

 A bank statement is a record of beginning balance, any

increase and decrease that have occurred since the
previous statement and the ending balance of the
depositor’s account with the bank.
Bank Reconciliation
Statement:
 If there is any discrepancy between the balance of cash
book and pass book, the depositor prepares the
statement to explain the causes of discrepancies and to
reconcile the two balances. This statement is called
Bank reconciliation Statement.
Continue:
 The purpose of this statement is to discover various
things that bank has done in the Pass book which the
cashier was not aware of.
 The statement is prepared at the end of month or year
end and when there is no discrepancy there is no need
to prepare this statement.
Causes of Disagreement:
 1: Cheque issued to Creditor but not paid by Bank:

 Cashbook Less +
 Depositors Account More –
Continue:
 2: Cheque deposited for collection but not yet collected
or credited by bank;
 Cash book More -
 Depositors Account Less +
 3: Amount deposited directly into the bank by customers
 Cash book Less +
 Depositors Account More -
Continue:
 4:Dividend Collected by Bank:
 Cash book Less +
 Depositors Account More -
 5: Interest on Deposit

 Cash book Less +

 Depositors Account More -
Continue:
 6:Insurance premium Office rent on standing order
bank provide service:

Cash book More -


 Depositors Account Less +
 7: Bank Charges
 Cash book More -
 Depositors Account Less +
Ex 1:
 Company A bank statement dated Dec 31, 2011 shows
a balance of $24,594.72. The company cash records on
the same date show a balance of $ 23,196.79.
Following additional information is available:
Continue:
 1: Following cheques issued by the company to its
customers are still outstanding:

 No 846 issued on Nov 29 $320

 No 875 issued on Dec 26 $49.21
 No. 878 issued on Dec 29 $275
 No. 881 issued on Dec 31 $ 186.50
Continue:
 2: A deposit of $ 400 made on Dec 31 does not appear
on Bank statement.
 3: An NSF cheque of $ 850 was returned by the bank
with the bank statement.
 4: The bank charged $50 as service fee
 5: Interest income earned on the company average cash
balance at bank was $ 1,237.22
Continue:
 6: The bank collected a note receivable on behalf of the
company. Amount received by the bank on the note was
$550. This includes $50 interest income. The bank charged a
collection fee of $ 10.
 7:A deposit of $430 was incorrectly entered as $340 in the
company cash records.
 Prepare a bank reconciliation statement using the above info:
Ex 2:
 Prepare bank Reconciliation statement for MR X 31st
march, 2005: As per cash book.
 1: On 31st march 2005, the bank balance as per the cash
book was $30,000.
 2: The following cheques were deposited into the bank 0n
28 March but were not collected by bank by 31st march.
A: $1000 B: $ 600 C: $ 400
Conitue:
 3:The following cheques were issued but were not
presented for the payment by 31st March:
 A: 400 B: 900 C: 1050 D: $750
 4: The bank credited a dividend of $ 4000 on 31st
march but intimation has not received yet.
 5: The bank credited interest of $ 100
Continue:
 6: The bank debited charges of $ 200
 7:A cheque of $ 1000 was received from a customer
and was entered in the bank column of cash book on
25th march, but was paid into the bank on 1st April.
Ex 3:
 ABC international is closing its books for the month ended
April 30. ABC controller must prepare a bank reconciliation
based on the following issue:

 1: The bank statement contains an ending bank balance of $

320,000
 2: The bank statement contains a $ 200 cheque printing
charge for new cheques that the company ordered.
Continue:
 3: The bank statement contains a $ 150 service charge
for operating the bank Account.
 4: The bank statement rejects a deposit of $500 due to
not sufficient fund and charges the company a $10 fee
associated with the rejection.
 5: The bank statement contains interest income of $30
Continue:
 6: ABC issued $80,000 of cheques that have not yet
cleared the bank.
 7:ABC deposited $25,000 of cheques at month end that
were not deposited in time to appear on the bank
statement.
Ex 4:
 On 30th june, 1994 the bank column of Anil’s cash book
showed a debit balance of $ 8,250. On examination of
cash book and bank statement you find that:
 1: Out of total cheques amounting to $ 8000 issued,
cheques amounting to $ 5,800 have been presented for
payment up to 30th June, 1994.
Continue:
 2: Out of total cheques amounting to $ 6,000 sent to
bank for collection, cheques of $ 4,100 were credited in
pass book up to 30th June, 1994.
 3: On 28th June a customer deposited $ 3,500 direct in
the bank account but it was entered only in the pass
book.
Continue:
 4:Debit side of Anil’s cash book(bank column) has been
overcast by $100.
 5: No entery has been made in the cash book for the rent of $
800 paid by bankers according to Anil’s standing
instructions.
 6: The pass book showed a credit of $ 320 for interest and
debit of $ 40 for bank charges, but these have not been
entered in the cash book.
Ex: 5
 On June 30th 20XX cash book shows a deit balance of $1700:
 1: Check issued on June 29 have not yet cleared the bank
account $300
 2: Deposit made into bank account on June 30 was not
recorded by the bank until July 1 $435
 3: June bank charges on the bank statement $62
 4:June standing orders $160
Continue:
 5:A cheque received and deposited into the bank
account was refused by the paying bank, $230
 6:A payment has been entered twice into cash account
$140
 7:June bank interest shown on the bank statement $167
Ex 6:
 Following information supplied by Sanjay prepare his
bank reconciliation statement as on December 31,2008
 1: Balance as per pass book $16,500
 2: Cheques issued but not presented for payment
$8,750
 3: Cheque deposited with bank not collected $ 10500
Continue:
 4: Cheque recorded in cash book but sent to the bank
for collection $2000
 5: Payment received from cutomer directly by bank
$3500
 6:Bank charges debited in the pass book $200
 7: Premium on life policy of Sanjay paid by bank on
standing advice $1,980
Ex 7:
 Prepare bank reconciliation statement for Ahmad as on
30th September,2003:
 Balance as per pass book $10,000
 1:Cheque deposited into the bank but no entry was
passed in cash book $500.
 2: Insurance premium paid directly by the bank under
the standing order $600
Continue:
 3: Bank charges entered twice in cash book $20
 4: Cheque issued, but not presented to the bank for
payment $500
 5: Cheque received entered twice in cash book $1,000