Question

Bank collected dividend of Rs.$25,000$ on behalf of customer which was not recorded in cash book.
In respect of the above given transaction which of the following treatment is correct for preparation of bank reconciliation statement?
(I) If BRS is prepared without adjusting cash book and the balance as per cash book is starting point then Rs.$25,000$ will be subtracted.
(II) If BRS is prepared with adjusted cash book then Rs.$25,000$ will be debited to the adjusted cash book.
(III) If BRS is prepared without adjusting cash book and the balance as per cash book is starting point then Rs.$25,000$ will be added.
(IV) If BRS is prepared with adjusted cash book the Rs.$25,000$ will be credited to the adjusted cash book.

• A. (I) only is correct.
• B. (II) only is correct.
• C. (III) only is correct.
• D. (II) & (III) is correct.

Answer 1

The correct option is C (III) only is correct.

While preparing an adjusted cash book, errors, omissions or entries which affect the cash book are to be considered. When bank collects dividend on the customers behalf , this entry requires adjustment in the cash book and so it would be debited to the cash book.

But, when bank reconciliation statement is being prepared and if adjusted cash book is the starting then the above adjustment should not be taken into consideration again as it has been already adjusted.

So, if bank reconciliation statement is prepared without adjusting cash book only then the dividend collected by bank will be added.