BALANCE SHEET AND BANK RECONCILIATION

Group 6 Cyrus Berne R-11-02 Sagar Devarkar R-11-06 Oswinda Gomes R-11-17 Sahil Nerurkar R-11-23 Rincy Johnson R-11-31 Mohammad Ayaz R-11-36

INTRODUCTION
Statement of financial position
Left hand side liabilities, right hand side - assets

Represent true financial position Balance sheet always balances

NEED AND IMPORTANCE

Knowledge of financial position

Comparison of current years position with last years

Find out current assets and current liabilities

Find out proprietors equity

SPECIMEN OF A BALANCE SHEET

Balance sheet as on 31:12:2011

Liabilities
Capital Add interest on capital Less drawings Add net profit Bills payable Sundry creditors Outstanding expenses Bank loan Bank overdraft Interest received in advance xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx Less new R.D.D Closing stock Motor van Less depreciation Land Add appreciation xxx xxx xxx xxx xxx xxx xxx

Amount

Assets
Cash in hand Cash in bank Prepaid expenses Bills receivable Sundry debtors Less bad debts xxx xxx xxx

Amount
xxx xxx xxx xxx

xxx xxx xxx

MARSHALING OF BALANCE SHEET

For registered companies- prescribed form Liquidity order

Permanency or fixed order

SPECIMEN OF A LIQUIDITY ORDER BALANCE SHEET

Balance sheet as on 31:12:2011

Liquidity
Bank overdraft Outstanding expenses Income received in advance Bills payable Loan creditors

Amount
xxx xxx xxx xxx xxx

Assets
Cash in hand Cash at bank Prepaid expenses Accrued income Bills receivable

Amount
xxx xxx xxx xxx xxx

Trade creditors
Long term loans Reserve and surplus Capital

xxx
xxx xxx xxx

Sundry debtors
Closing stock Investment (long term) Furniture and fixtures Plant and machinery Land and building Trade mark Goodwill

xxx
xxx xxx xxx xxx xxx xxx xxx xxx

xxx

SPECIMEN OF A PERMANENCY ORDER BALANCE SHEET

Balance sheet as on 31:12:2011

Liquidity
Capital Reserve and surplus Long term loan Trade creditors Loan creditors

Amount
xxx xxx xxx xxx xxx

Assets
Goodwill Trademarks Land and building Motor van Furniture and fixtures

Amount
xxx xxx xxx xxx xxx

Bills payable
Outstanding expenses Income received in advance Bank overdraft

xxx
xxx xxx xxx

Investments (long term)

Closing stock Sundry debtors Bills receivable Accrued income Prepaid expenses Cash in bank Cash in hand

xxx
xxx xxx xxx xxx xxx xxx xxx xxx

xxx

IMPORTANCE OF MARSHALING OF BALANCE SHEET

Systematic flow of information Decision making

PRESENTING OF A BALANCE SHEET

Vertical format- single column on right hand side

Horizontal format t format

BALANCE SHEET OF A PARTNERSHIP FIRM

Similar in many cases- certain special features

Partnership, sole- proprietor no prescribed format

SPECIMEN OF BALANCE SHEET OF A PARTNERSHIP

Balance sheet as on 31:12:2011

Liabilities A partners capital Less drawings xxx xxx xxx Add interest on capital xxx xxx Add net profit xxx xxx Amount Assets Goodwill Plant and machinery Less depreciation Office furniture Less depreciation Sundry debtors xxx xxx xxx xxx xxx xxx xxx Amount xxx

B partners capital Less drawings

xxx xxx
xxx

Less provision Cash in hand

Closing stock

xxx xxx
xxx

Add interest on capital

xxx xxx

Add net profit Bills payable Sundry creditors

xxx xxx xxx xxx xxx xxx

BALANCE SHEET OF A NON GOVERNMENT ORGANIZATION

Not trading activity- dont earn profit but give service

Balance sheet of NGO prepared same as trading organization

Difference between total assets and liabilities net assets

Depicts overall status of organization

OBJECTIVES OF NGO ACCOUNTING

Money received and spent Funds utilized properly Provide financial report

DIFFERENCE BETWEEN PROFIT ORGANIZATION AND NON- PROFIT ORGANIZATION

Profit organization
Earn profit
Interest of owners- owners funds Net result net profit / loss Final accounts consist trading a/c, profit and loss a/c and balance sheet

Non profit organization

Provide service
Interest of members- capital fund Net result- surplus or deficit Final accounts consist receipt and payment A/c, income and expenditure a/c and balance sheet

SPECIMEN OF A NON GOVERNMENT ORGANIZATION BALANCE SHEET

Balance sheet as on 31:12:2011

Liabilities Capital funds Add entrance fee Unpaid salary Building funds Tournament funds Charity fund Loan from others xx xx xx xx xx xx xx xx Amount Assets Cash in hand Cash in bank Debtors Investments Books Sports material Furniture Amount xx xx xx xx xx xx xx

Sundry creditors
Outstanding expenses Income received in advance Income and expenditure a/c

xx
xx xx xx xx

Building
Grounds Outstanding income Prepaid expenses

xx
xx xx xx xx

FROM THE FOLLOWING PARTICULAR PREPARE A BALANCE SHEET AS ON 31ST DECEMBER 2007

Particular Furniture and fixture

Amount 25,000

Particular Net profit for the year 2007

Amount 38,000

Investments
Land and building Capital Plant and machinery Bank over draft Goodwill Bills receivable

40,000
1,20,000 3,00,000 54,000 9,000 23,000 17,000

Sundry debtor
Cash in hand Bills payable Motor vehicle Drawings Loan to Mr.. Beckham Loan from Mr. Brandon

28,000
2,100 12,1000 32,000 5,300 15,000 18,000

Trade creditors
Prepaid expenses

21,700
2,500

Closing stock

16,000

SOLUTION

Balance sheet as on 31:12:2011

Liabilities Capital Add net profit Less drawings 3,00,000 38,000 3,.38,000 5,300 3,32,700 Amount Assets Goodwill Land and building Plant and machinery Motor vehicles Amount 23,000 1,20,000 54,000 32,000

Bills payable Bank overdraft

Loan from Mr. Brandon Trade creditors

12,100 9,000
18,000 21,700

Furniture and fixtures Investments

Sundry debtors Prepaid expenses Bills receivable Loan from Mr. Beckham Closing stock Cash in hand

25,000 49,000
28,000 2,500 17,000 15,000 16,000 21,000 3,93,500

3,93,500

SOLVE THE PROBLEM EXERCISE 1

TRADING ACCOUNT FOR THE YEAR 31-03-2007 Particular Amount Particular Amount

To opening stock To purchases

To freight To wages 36,150

86,5000 1,78,000
9,850

By sales By closing stock

By goods loss by fire

3,78,000 1,56,000
17,000

Add outstanding wages 6,000 42,150

To gross profit c/d

2,84,500 5,51,000 5,51,000

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31-03-2007

Particular
To stationary To mobile phone bills To insurance 16,800

Amount
17,000 12,500

Particular
By gross profit b/d

Amount
2,84,500

Less prepaid insurance

To salaries Add outstanding salary To bad debts

12,600
26,000 17,075 2,500

4,200
43,075

Add F.B.D.
Add N.R.D.D. To travelling expenses To value added tax To interest on loan To depreciation on furniture To depreciation on motorcar To loss by fire

2,500
5,000 4,000 9,000 8,500 11,700 10,125 12,000 45,000 6,000

BALANCE SHEET AS ON 31-03-2007

Liabilities Narands capital Add net profit Surands capital Add net profit Creditors Bank loan Add interest on loan Outstanding rent 90,000 10,125 2,50,000 63,240 1,50,000 42,160

Amount 3,13,240

Assets Debtors Less F.B.D Less N.R.D.D. 42,500 2,500 40,000 4,000 80,000 12,000

Amount

36,000 68,000 2,50,000 23,000

1,92,160 99,500 1,00,125 11,500

Furniture Less depreciation Building Cash in hand Motor car Less depreciation

1,80,000 45,000 1,35,000

Outstanding wages Outstanding salary

6,000 17,075

Closing stock Prepaid insurance

Bills receivable Insurance (loss by fire)

1,56,000 12,600
48,000 11,000 7,39,600

7,39,600

PROBLEM ON VERTICAL BALANCE SHEET

THE FOLLOWING IS THE BALANCE SHEET OF EVERGREEN LIMITED AS ON 31ST MARCH 2009. PREPARE VERTICAL BALANCE SHEET OF THE FOLLOWING

Balance sheet as on 31:12:2011

Liabilities Share capital Authorized, issued and subscribed capital 9,00,000 Reserve and surplus General reserve 1,20,000 Amount Assets Fixed assets Machinery Investments UTI bonds 2,05,000 7,90,000 amount

Secured loan
Loan from bank Unsecured loan Public deposit Current liabilities and provision Current liabilities Trade creditors 50,000 1,20,000 3,30,000

Current assets loans and advance

Current assets Trade debtors Cash at bank Loan and advances Bills receivable Miscellaneous expenditure 70,000 NIL 3,00,000 1,75,000

Provision Provision for tax 20,000

Balance sheet as on 31:12:2011

Particular SOURCES OF FUNDS Amount Amount

SOLUTION

A) Share capital
Authorized capital, issued capital , subscribed capital B) Reserve and surplus General reserve Shareholders funds/ net profit (A+B) C) Loan funds Secured loan Loan from bank Unsecured loan 3,30,000 1,20,000 1,20,000 10,20,000 9,00,000 9,00,000

Public deposit

1,20,000

4,50,000

Total capital employed (A+B+C)

14,70,000

Particular APPLICATION OF FINDS A) Fixed assets Machinery B)Investment UTI bond C) Current assets loan and advances Current assets

Amount

amount

7,90,000 2,05,000

7,90,000 2,05,000

Trade debtors
Cash at bank Loan and advances Bills receivable Less current liabilities and provision Current liabilities Trade creditors Provision Provision for tax D) miscellaneous expenditure

3,00,000
1,75,500 70,000 5,45,000

50,000 20,000 70,000 -----4,75,000

BANK RECONCILIATION STATEMENT

Cash book businessman, pass book- bank

Same transactions recorded- balance must match

At times balance dont agree

Statement showing items of difference between cash and pass book

CAUSES OF DIFFERENCE

Cheque issued but not presented for payment Cheque deposited in bank but not collected

Interest allowed and credited by the bank

Collection of dividend by the bank

Dishonor of cheque
Interest charged or bank chargers debited in pass book

NEED AND IMPORTANCE OF BANK RECONCILIATION STATEMENT

Bring out errors committed

Show undue delay in clearance of cheque
Frauds by entrepreneur's or bank staff can be detected

FORMAT OF A BANK RECONCILIATION STATEMENT

Bank reconciliation statement as on .

Amount Balance as per cash book/ pass book Cheque issued but not presented to bank for payment Cheque drawn but not actually issued to parties Cheque issued to parties but dishonored by bank Wrong or excess credit in cash book Cheque or bank directly paid in bank by others xx xx xx xx xx xx Amount

Cheque deposited in the bank but not debited in cash book` Cheque issued but not credited in cash book
Cheque debited in cash book but not deposited Wrong or excess debit in cash book Bank charges, interest on overdraft Direct payment by bank Bank balance as per cash book/ pass book Total

xx xx
xx xx xx xx xx xx xx

RECTIFY THE CASH BOOK

Cash book balance Rs. 1,500 Cheque deposited but not collected by bank Rs. 500 Direct deposit made by customers Rs. 400 Insurance premium paid by bank Rs. 100 Bank charges Rs. 600 Dividend collected by bank Rs. 300

SOLUTION

Bank reconciliation statement

Amount Balance as per cash book Cheque deposited but not collected by bank 1,500 500 Amount

Direct deposit made by customer

Insurance premium paid by bank Bank charges Dividend collected by bank Balance as per pass book

400
100 600 300 2,200 2,200

SOLVE THE FOLLOWING

The cash book shows a bank balance of 7,800 on comprising the cash book with the pass book. The following discrepancies were found Cheque deposited in bank but not credited Rs. 3,000 Cheque issued but not yet presented for payment Rs.1,500 Insurance premium paid by bank Rs. 400 Bank charges Rs. 100 Direct deposit by customers Rs. 4000 Prepare bank reconciliation statement as on 31 march 2009