Accounting for Bill

column. The name of expenses account must be in line with the name of business
account
7. Other expenses is separated to account name and amount of money for expenses
seldom occur and have no specific column

Example 2 Thanon Company Limited set up a petty cash of 10,000 Baht and issued a cheque

to petty cash custodian on 2nd January 25x1

25x1

Jan 3 Paid for office newspaper 370 Baht

5 Paid for transportation-in to shop 600 Baht

7 Bought Beverages for customers 890 Baht

8 Bought tea, sugar, coffee and cream 450 Baht

9 Paid for transportation-out to customers 800 Baht

11 Paid for Taxi fee 250 Baht

12 Paid for miscellaneous expense 380 Baht

14 Paid for transportation-in to shop 190 Baht

16 Bought beverages to entertain customers 590 Baht

17 Paid for commission fee 1,000 Baht

19 Paid for transportation-out to customers 340 Baht

21 Paid for computer repairing 650 Baht

22 Paid for Taxi fee 180 Baht

25 Bought food and beverages to entertain customers 645 Baht

28 Paid for office equipment repairing 370 Baht

31 Petty cash custodian collected all payment forms to reimburse under

Imprest System and received the cheque for replenishment

Accounting for Bill BUNYAWEE SUWANNABOOL

Petty Cash

Date Inv. Total Freight Freight Enter Fixed Miscella Other Account
No. In Out tainment Exp.
251x neous
Exp.
Exp. Account Amount
Jul 3 001 370.-
370.-

5 002 600.- 600.-

7 003 890.- 890.-
8 004 450.-
450.-

9 005 800.- 800.-

11 006 250.- Transportation Exp. 250.-
12 007 380.- 380.-

14 008 190.- 190.-

16 009 590.- 590.-
17 010 1,000.-
Commission Exp. 1,000

19 011 340.- 340.-

21 012 650.- 650.-
22 013 180.-
Transportation Exp. 180.-

25 014 645.- 645.-

28 015 370.- 370.-

790.- 1,140.- 2,125.- 1,020.- 1,200.- 1,430.-

Petty cash entry

During 1-31 January 25x1

No. Description Amount

1 Freight In Expense 790 -
1,140 -
2 Freight Out Expense 2,125 -
1,020 -
3 Entertaining Expense 1,200 -
430 -
4 Fixed Expense 1,000 -
Total 7,705 -
5 Miscellaneous Expense
6 Transportation Expense
7 Commission Expense

Signature Bunyawee Petty cash custodian

( Miss Bunyawee Suwannabool )

Accounting for Bill BUNYAWEE SUWANNABOOL

Benefits of Petty Cash

1. Assigning responsibility on miscellaneous expenses to petty cash custodian
2. Helping the business to have concisely internal control on petty cash because using petty

cash will create many cheque payment and using it on miscellaneous expenses will reduce
corrupted action
3. Reducing time on accounting record on miscellaneous and frequently-occurred expenses
because all entries can be recorded at once when the petty cash custodian reimburses
4. Helping the business to avoid too much cash holding on hand which may affect the loss of
opportunity to use cash to increase benefit

Cash Short and Cash Over

Business that receives a lot of payment each day will compare cash received with the
evidences from cashier machine or receipts the end of the day. When cash amount is not equal to the
evidences, business needs to find reasons on that which can be corrupted action that needs to find a
responsible person or mistook transfers to customer. If the amount is few, it will be mistake in giving
changes. When there are cash short or cash over, account adjusting is done with the opening of the new
account called ‘Cash short and over account’.

To record Cash short and over account, it is divided into 2 cases.

1. When cash received is more than cash evidences , record the account by

Cash xx
Sales
Cash short and over xx
xx

2. When cash received is less than cash evidences , record the account by

Cash xx

Cash short and over xx

Sales xx

At the end of accounting period, for cash short and over account, if there is balance
on debit, it is expenses that will be taking to other expenses account and if there is balance on credit, it
is income that will be taking to other income account and will show in financial statement.

Accounting for Bill BUNYAWEE SUWANNABOOL

Petty Cash Accounting Record

Petty cash accounting record in the book of original entry and posting to other related ledgers
can be recorded in 2 steps which are

1. Setting up petty cash limit
2. Reimbursing petty cash

Setting up petty cash limit

Petty cash limit set up in the cash payment journal. If business does not have cash payment
journal, entries can be recorded in the general journal.

Example 3 On 1 July 25x1, business set up a petty cash of 5,000 Baht and issued a cheque to
petty cash custodian today and petty cash is reimbursed on the last day of each month.

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 Petty Cash 5,000 -
Jul 2 Bank Account

Set up petty cash 5,000 -

Bank No.102

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
- Jul 2 Petty Cash J.1 5,000

Accounting for Bill BUNYAWEE SUWANNABOOL

Petty Cash No.103

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jul 2 Bank J.1 5,000 -

Reimbursing petty cash

Reimbursing petty cash is done when it the designated time to reimburse or when the petty
cash on hand runs low. Petty cash custodian is responsible to collect petty cash forms and report the
petty cash payment summary which will have a staff accountable for checking accuracy before issuing
cheques to petty cash custodian.

Example 4 from example 2 Entries in petty cash book can be recorded in the petty cash
payment summary as below

Petty cash entry
During 1-31 January 25x1

No. Description Amount
1 Freight In Expense 790 -
2 Freight Out Expense
3 Entertaining Expense 1,140 -
4 Fixed Expense 2,125 -
5 Miscellaneous Expense 1,020 -
6 Transportation Expense 1,200 -
7 Commission Expense
430 -
1,000 -
Total 7,705 -

Signature Bunyawee Petty cash custodian

( Miss Bunyawee Suwannabool )

Accounting for Bill BUNYAWEE SUWANNABOOL

Accounting record when issuing cheque to petty cash custodian

General Journal A/C Debit Page 10
No.
Date Transactions 790 - Credit
501 1,140 -
25x1 502 2,125 - 7,705 -
503 1,020 - 7,705 -
Jan 31 Freight In Expense 504 1,200 -
Freight Out Expense 505 430 -
Entertaining Expense 506 1,000 -
Fixed Expense 507
Miscellaneous Expense 102
Transportation Expense
Commission Expense
Petty Cash
Reimbursed petty cash.

Petty Cash 7,705 -

Bank Account

Posting to other related ledgers

Freight In Expense No.501

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1 790 -
Jan 31 Bank J.10

Accounting for Bill BUNYAWEE SUWANNABOOL

Freight Out Expense No.502

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jan 31 Bank J.10 1,140 -

Entertaining Expense No.503

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jan 31 Bank J.10 2,125 -

Fixed Expense No.504

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1 1,020 -
Jan 31 Bank J.10

Miscellaneous Expense No.505

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jan 31 Bank J.10 1,200 -

Accounting for Bill BUNYAWEE SUWANNABOOL

Transportation Expense No.506

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jan 31 Bank J.10 430 -

Commission Expense No.507

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Jan 31 Bank J.10 1,000 -

Adjusting Petty Cash Account at the end of Accounting Period

At the end of accounting period, petty cash custodian has to collect petty cash form to reimburse

expenses from petty cash payment to be taken as expenses into the accounting period and to correctly show in

financial statement. It will also make petty cash account balance equals to the original set-up amount.

If the petty cash custodian did not collect petty cash form to reimburse expenses, it will be taken that

those expenses from petty cash payment in the accounting period will not be recorded and make the financial

statement balance lower than reality. Thus, petty cash account adjusting needs to be done at the end of

accounting period.

Example 5 On 31st December 25x1, petty cash custodian has collected petty cash forms that

have not yet been reimbursed as follow;

Entertaining fee 950 Baht

Transportation fee 530 Baht

Freight-in fee 900 Baht

Accounting for Bill BUNYAWEE SUWANNABOOL

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x1 950 -
530 -
Dec 31 Entertainment Expense 900 -
Transportation Expense
Freight-in Expense 2,380 -
Petty cash
Adjusted petty cash entries that did not
reimburse.

Petty Cash No. 103

Date Transactions Post Dr. Date Transactions Post Cr.
Ref Ref
25x1
Dec 1 Bank J.10 25x1

5,000 - Dec 31 Entertainment J.10 950 -

Transportation J.10 530 -

Freight-in J.10 900 -

Carried Forward  2,620 -

5,000 - 5,000 -

25x2 1 Bring Forward 2,620 -

Jan Entertainment 950 -
Transportation
Freight-in 530 -

900 -

Accounting for Bill BUNYAWEE SUWANNABOOL

Posting reverse adjusted entries on the beginning date of accounting period

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x2 Petty cash 2,380 -
Jan 1 Entertainment Expense
Transportation Expense
Freight-in Expense 950 -
530 -
Adjusted petty cash entries that did not 900 -
reimburse.

Increasing or Decreasing Petty Cash Credit Limit

In the case that original petty cash limit is not suitable, either too low or too high, it has to be
updated by increase or decrease petty cash to fit the necessarily use of the business.

Increasing petty cash limit

Example 6 On 1 March 25x1, business wants to increase its petty cash from 10,000 Baht to
15,000 Baht and issued a cheque to petty cash custodian today.

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x1 5,000 -

Mar 1 Petty cash 5,000 -

Bank Account

Recorded increase of petty cash limit.

Accounting for Bill BUNYAWEE SUWANNABOOL

Decreasing petty cash limit

Example 7 On 1 June 25x1, business wants to decrease its petty cash from 20,000 Baht to
10,000 Baht and called back the cash over from petty cash custodian and deposits it to the bank.

General Journal Page 1

Date Transactions A/C Debit Credit
No.

25x1 Bank Account 10,000 -
Jun 1
Petty cash
Recorded decrease of petty cash limit. 10,000 -

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 11
Bank Reconciliation Statement

Contents
1. Definition of Bank Statement
2. Reasons for Balance Differences between Business Cash Book and Bank Statement
3. Preparing Bank Reconciliation Statement by Finding the Corrected Balance
4. Recording Adjusted Entry in General Journal
5. Preparing Bank Reconciliation Statement by Reconciliation from one party to another party
6. Definition of Bank Overdraft
7. Preparing Bank Overdraft Statement

Learning Objectives

1. To be able to define and explain bank statement
2. To be able to explain reasons for balance differences between business cash book and bank

statement
3. To be able to explain steps on bank reconciliation and how-to do it
4. To be able to preparing bank reconciliation statement by finding the corrected balance
5. To be able to preparing bank reconciliation statement by reconciliation from one party to

another party
6. To be able to define and explain bank overdraft
7. To be able to record entry in general journal

Current Accounts บัญชีเงนิ ฝากกระแสรายวัน
Saving Account บญั ชีเงนิ ฝากออมทรพั ย์
Fixed Account บญั ชเี งนิ ฝากประจา

Accounting for Bill BUNYAWEE SUWANNABOOL

Chapter 11
Bank Reconciliation Statement

Most businesses open current accounts with the bank, which it has no bankbook given; however,
they know details about deposits, withdrawals and even balance from the bank statement that the bank
sends to them at the end of each month. When business receives the bank statement, it will check with
accounting records. It is normal for a bank balance as per bank statement to differ from the balance as per
accounting records; therefore, business needs to do the bank reconciliation statement.

Definition of Bank Statement

The bank statement is a report released by banks to the business that lists details of balance,
deposits, withdrawals, returned cheques, and service charges incurred on the business current account
each month. It also shows the balance of the last day in the report.

Reasons for Balance Differences between Business Cash Book and Bank Statement

When business received a bank statement, it will check with business’s accounting records that the
balance is equal or not. If the balance is not the same, business needs to prepare bank reconciliation
statement to find the differences between balances of the cash book and the bank statement. There are
reasons why balances are different.

1. Only business recorded the increase or decrease in the balance.

1.1. Entries affect increase in balance – business deposits cash or cheque at the
end of the accounting period. Business already recorded the entries, but the bank has not and will do in
the next month. Therefore, the deposits do not show on the bank statement, and the entry is called
‘Deposits in transit‘. In this case, the balance in business cash book is higher than the bank statement.

1.2. Entries affect decrease in balance but the bank has not yet deduct the balance
because the business already issued cheques and payees have not yet cashed in at the bank. The entry is
called ‘Outstanding Cheques‘. In this case, the balance in business cash book is lower than the bank
statement.

Accounting for Bill BUNYAWEE SUWANNABOOL

2. Only banks recorded the increase and decrease in the current account or in the
Bank statement and has not yet notify the business.

2.1. Entries that only banks recorded the increase in the current account. In this
case, business’s balance is lower than on the bank statement. For example,

2.1.1 The bank collect money from bills and record the increase in the current account,
but the business does not know.

2.1.2 Deposit interest (Interest income) – business has deposits with the bank.
When the bank calculates interest to business, the bank already added the increase to
the account , but the business does not know.

2.2. Entries that only banks recorded the decrease in the current account, but the
business has not. In this case, business’s balance is higher than on the bank statement. For example,

2.2.1. The bank service charges are fees incurred to business from the bank such as fees
on funds transfer or bills collection. When the bank charged these fees, it will deduct

money from Business cash book without notifying the business
2.2.2. Returned cheques or dishonored cheques that business received and already

deposited to the bank. Both the business and the bank recorded the increase, but the
bank cannot collect money. Therefore, the bank decrease the balance and business
will know once received the bank statement.
2.2.3. Business has the bank pay expenses on its behalf such as water bill, electricity bill
or phone bill. When these expenses occurred, the bank will deduct from the balance
and business will know once received the bank statement.

3. Business or bank errors on entries recording.

3.1 Bank errors such as increase the business’s balance by deposits from other customers into
the business, making the business’s balance higher or lower than it is.

3.2 Business errors such as recording cheque payment or regular payment with wrong amount,
making the business’s balance higher or lower than it is.

Accounting for Bill BUNYAWEE SUWANNABOOL

Bank reconciliation statement can be prepared in 2 ways

1. Finding the corrected balance
2. Reconciliation from one party to another party

2.1. Reconciliation of the business cash book balance to the bank statement balance
2.2. Reconciliation of the bank statement balance to business cash book balance

Depositing cash to the bank is one of cash’s internal controls. By deposit cash to the bank in the
current account, the bank will send a report on deposits and withdrawals to inform the business at the end
of the month. When receiving the bank statement, if the balance in it does not match with the balance in
business cash book, business can check the true amount of balance by preparing the bank reconciliation
statement.

Steps and how-to prepare the bank reconciliation statement

Steps to find differences of the balance in business cash book and the bank statement are;
1. Compare the deposit entries on the business cash book with the bank’s deposit
column of the bank statement and mark if it is correct. Those do not match are the differences
2. Compare the cheque payment on the business cash book with the bank’s
withdrawal column of the bank statement and mark if it is correct. Those do not match are the differences
3. Find the record that only the bank processed and the business has not recorded yet such as
bank service charges, interest income, returned cheques or bank errors on entries recording. If such things
can be found, those are differences.
4. Find the record that only the business processed such as deposit in transit or business errors
on entries recording. If such things can be found, those are differences.

Finding the corrected balance

To prepare the bank reconciliation statement by finding the corrected balance is to find the
balance on the bank statement to match with the balance in business cash book .

Accounting for Bill BUNYAWEE SUWANNABOOL

Preparing Bank Reconciliation Statement by Finding the Corrected Balance

Methods on preparing bank reconciliation statement by finding the corrected balance are
1. Set the balance in Business cash book on one side and the balance on the bank statement
on the others.
2. Add or deduct reasons that make both sides unmatched. An entry that either side has not
recorded or has made errors such as deposit in transit that the bank has not yet recorded, the bank has to
add to the bank’s balance.
3. The result is that the business’s balance will equal to the balance on the bank statement.

Using preparing bank reconciliation statement by finding the corrected balance method

Name of business

The bank reconciliation statement

For date……………………………………..

Balance per Bank Statement xxx Balance per Business cash book xxx
Add Deposit in transit xx Add A/R , Note receivable xx

Error on cheque deduction xx Interest income xx
Business recorded account higher xx
The bank deducted higher amount than the issued cheque

than the issued cheque xx

The bank recorded deposit lower Business recorded deposit lower

than the true amount xx xxx than the true amount xx xxx

Less Outstanding cheque xx Less Returned cheque xx
The bank deducted lower amount xx Bank service charges xx
than the issued cheque

The bank recorded deposit higher Payment through the bank xx

than the true amount xx xxx

Business recorded account lower

than the issued cheque xx

Business recorded deposit higher

than the true amount xx xxx

Corrected balance X,xxx Corrected balance X,xxx

Accounting for Bill BUNYAWEE SUWANNABOOL

Example 1 On 31 May 25x2, Keawta Company received a bank statement with the balance of
37,090 Baht, but the balance on the business cash book was 33,630 Baht. Thus, business checked and
found differences below;

1. Business issued 2 cheques to creditors on 28 May 25x2 but the creditors have not yet cashed
in.
Cheque no. 9163542 total amount of 5,300 Baht
Cheque no. 9163545 total amount of 3,840 Baht

2. Business deposit 8,500 Baht on 31 May 25x2, but the bank has not yet recorded the entry.
3. The bank charged 300 Baht for funds transfer.
4. Business paid a cheque; no. 9163549, to buy office supplies of 6,300 Baht, but the business’s

staff recorded 3,600 Baht
5. The bank collected bills for business on 27 May 25x2 and recorded deposit to the Business

cash book of 8,320 Baht (The bill’s face value of 8,000 Baht with an interest earned 400 Baht
and deduct the bank collection fee of 80 Baht).
6. Bank error on other business’s cheque deducted 2,500 Baht from the business account.

Using preparing bank reconciliation statement by finding the corrected balance method
Keawta Company

The bank reconciliation statement
For 31 May 25x2

Balance on Bank Statement 37,090 Balance on Business cash book 33,630
Add Deposit in transit 8,000
8,500 Add Note receivable 400 8,400
Error on cheque deduction
2,500 11,000 Interest income 42,030
Less Outstanding cheque 380
# 9163542 48,090
# 9163545 2,700 3,080
Less Bank service charges 38,950
Corrected balance
5,300 Business recorded account

3,840 9,140 lower than the issued cheque

38,950 Corrected balance

After preparing the bank reconciliation statement, business will need to adjust entries that have not
yet recorded or recorded errors in the business’s general journal.

Accounting for Bill BUNYAWEE SUWANNABOOL

General Journal A/C Page 1
No.
Date Transactions Debit Credit

25x2 8,400 -
May 31 Bank Account
8,000 -
Note Receivable 400 -
Interest Income
Adjusted bill that the bank collected.

Bank service charge 380 -
Office Equipment 2,700 -

Bank Account 3,080 -
Adjusted fee the bank charged to business and
recorded cheque payment the lower than true amount.

Reconciliation from one party to another party

1. Reconciliation of business cash book balance to the bank statement balance

How to do:
1.1 Set the balance of business cash book .
1.2 Add or deduct reasons that make both sides unmatched to make both balances equal by follow

the accounting principle on the bank statement below;
1.2.1 If any differences make the business’s balance high and the bank statement low, use it

to deduct on the business side.
1.2.2 If any differences make the business’s balance low and the bank statement high, use it

to add on the business side.
1.3 The result is the balance on the bank statement.

Accounting for Bill BUNYAWEE SUWANNABOOL

Using reconciliation of the business cash book balance to the bank statement balance method

Name of business

The bank reconciliation statement

For date……………………………………..

Balance on Business Cash Book xx

Add Account Receivable / Note Receivable xx

Interest income xx

Business recorded account higher than the issued cheque xx

Business recorded deposit lower than the true amount xx

Outstanding cheque xx

The bank deducted lower amount than the issued cheque xx

The bank recorded deposit higher than the true amount xx xxx

xxx

Less Deposit in transit xx

Error on cheque deduction xx

The bank deducted higher amount than the issued cheque xx

The bank recorded deposit lower than the true amount xx

Returned cheque xx

Bank service charges xx

Payment through the bank xx

Business recorded account higher than the issued cheque xx

Business recorded deposit lower than the true amount xx xxx

Total Balance on the Bank Statement X,xxx

Accounting for Bill BUNYAWEE SUWANNABOOL

Example 2 from example 1, it can be considered that

Entry 1 Business low Bank high add Business
deduct Business
Entry 2 Business high Bank low deduct Business
deduct Business
Entry 3 Business high Bank low add Business
deduct Business
Entry 4 Business high Bank low deduct Business

Entry 5 Business low Bank high

Business high Bank low

Entry 6 Business high Bank low

Using reconciliation of business cash book balance to the bank statement balance method

Keawta Company

The bank reconciliation statement

For 31 May 25x1

Balance on Business Cash Book 33,630

Add Note Receivable 8,000

Interest income 400

Outstanding cheque

# No.9163542 5,300

# No.9163545 3,840 9,140 17,540

51,170

Less Bank service charges 380

Business recorded account lower than the issued cheque 2,700

Deposit in transit 8,500

Error on cheque deduction 2,500 14,080

Balance on the Bank Statement 37,090

Accounting for Bill BUNYAWEE SUWANNABOOL

2. Reconciliation of the bank statement balance to business cash book balance

How to do:

2.1 Set the balance of bank statement.

2.2 Add or deduct reasons that make both sides unmatched to make both balances equal by follow the

accounting record on the business’ s account below;

2.2.1 If any differences make the bank statement high and the business’s account low, use it to

deduct on the bank side.

2.2.2 If any differences make the bank statement low and the business’s account high, use it

to add on the bank side.

2.3 The result is the balance on the business cash book .

Name of business

The bank reconciliation statement

For date……………………………………..

Balance on Business Cash Book Xx,xxx

Add Deposit in transit xx

Error on cheque deduction xx

The bank deducted higher amount than the issued cheque xx

The bank recorded deposit lower than the true amount xx

Returned cheque xx

Bank service charges xx

Payment through the bank xx

Business recorded account lower than the issued cheque xx

Business recorded deposit higher than the true amount xx X,xxx

Xxx,xx

Less Account Receivable / Note Receivable xx

Interest income xx

Business recorded account higher than the issued cheque xx

Business recorded deposit lower than the true amount xx

Outstanding cheque xx

The bank deducted lower amount than the issued cheque xx

The bank recorded deposit higher than the true amount xx X,xxx

Total balance on the bank statement Xxx,xx

Accounting for Bill BUNYAWEE SUWANNABOOL

Example 3 from example 1, it can be considered that

Entry 1 Bank high Business low deduct Bank

Entry 2 Bank low Business high add Bank

Entry 3 Bank low Business high add Bank

Entry 4 Bank low Business high add Bank

Entry 5 Bank high Business low deduct Bank

Bank low Business high add Bank

Entry 6 Bank low Business high add Bank

Using reconciliation of the bank statement balance to business cash book balance method

Keawta Company

The bank reconciliation statement

For 31 May 25x1

Balance on Bank Statement 37,090

Add Bank service charges 380

Business recorded account lower than the issued cheque 2,700

Deposit in transit 8,500

Error on cheque deduction 2,500 14,080

51,170

Less Note Receivable 8,000

Interest income 400

Outstanding cheque

# No.9163542 5,300

# No.9163545 3,840 9,140 17,540

Balance on the Bank Statement 33,630

Accounting for Bill BUNYAWEE SUWANNABOOL

Recording Adjusted Entry in General Journal
After preparing the bank reconciliation statement, business will need to adjust entries that have not

yet recorded or recorded errors in the business’s general journal.

General Journal A/C Page 7
No.
Date Transactions Debit Credit

25x1 8,400 -
May 31 Bank account
8,000 -
Note Receivable 400 -
Interest Income
Adjusted bill that the bank collected.

General Journal A/C Page 8
No.
Date Transactions Debit Credit

25x1 2,700 -
May 31 Office Equipment 380 -

Bank’s service charge 3,080 -
Bank Account

Adjusted fee the bank charged to business and
recorded cheque payment lower than true amount.

Bank overdraft statement

Opening a current account, the bank usually refuses to make payment as order if the balance is
short, except the business has made an agreement with the bank in advance for overdraft with credible
collaterals such as saving deposit, fixed deposit or title deed and so on. When business issues a cheque
with the higher amount than the deposit, the deposit amount will change to bank overdraft and show in
credit side on the business cash book. At the end of the month, the bank will send a bank overdraft
statement with show debited amount or printed in red ink.

Accounting for Bill BUNYAWEE SUWANNABOOL

Definition of Bank Overdraft
Bank overdraft means the business withdraws from the bank more than what it has in the deposit

they have within its bank account. Business needs to make an agreement with the bank in advance for
overdraft and the bank will calculate interest only on overdraft amount. Bank overdraft is business’s
liabilities.

Preparing Bank Overdraft Statement

Bank overdraft statement can be prepared in 2 ways
1. Prepare in the same way as the bank reconciliation statement. The entries that are add,

still be add. The deduct entries are the same but put the ( ) on the overdraft amount. Then add and deduct
in accordance with Mathematic principle that the same signs together make a plus, different signs together
make a minus.

2. Prepare in the same way as the bank reconciliation statement but on any differences
that add in the bank reconciliation statement will change to deduct (Less). Any differences that deduct in
the bank reconciliation statement will change to add.

Example 4 On 30 November 25x1, Mitrsiam shop had an overdraft of 12,710 Baht in a bank statement,
but the balance on the business cash book on the same day is 15,810 Baht. Thus, business checked and
found differences below;

1. Business deposit a cheque valued 16,380 Baht on 26 November 25x1, the bank already
recorded the entry but the business’s staff recorded 13,680 Baht

2. The bank charged 370 Baht, not yet recorded.
3. Issued a cheque of 2,400 Baht, but the payee has not yet cashed in
4. Deposit to the bank on 30 November 25x1, but the bank has not credited 3,100 Baht into the

account.
5. Customer’s cheque was recorded but the bank cannot collect money and returned cheque of

1,800 Baht without any deduction.
6. The bank collected bills for business on 2 November 25x1 and recorded deposit to the

business cash book of 5,220 Baht (The bill’s face value of 5,000 Baht with an interest earned
300 Baht and deduct the bank collection fee of 80 Baht).
7. Bank error on other business’s cheque deducted 1,950 Baht from the business account.

Accounting for Bill BUNYAWEE SUWANNABOOL

To do: 1. Prepare bank reconciliation statement by finding the corrected balance.
2. Prepare reconciliation from one party to another party.
3. Record adjusted entry in general journal.

Mitrsiam shop
The bank overdraft statement

For 30 November 25x1

Balance on Bank Statement (12,700) Balance on Business Cash Book (15,810)
Add 4. Deposit in transit
3,100 Add 1. Deposit recorded lower than
7. Error on cheque deduction
1,950 5,050 the true amount 2,700
Less 3.Outstanding cheque
(7,660) 6.1 Note receivable 5,000

6.2 Interest income 300 8,000

(7,810)

2,400 Less 5.Returned cheque 1,800

2.Bank service charges 370

6.3.Bank service charges 80 2,250

Corrected balance (10,060) Corrected balance (10,060)

Mitrsiam shop
The bank overdraft statement

For 30 November 25x1

Overdraft Balance on Bank Statement 12,700 Overdraft Balance on Business Cash Book (15,810)
Add 3. Outstanding cheque
2,400 Add 2.Bank service charges 370

15,110 6.3Bank service charges 80

Less 4. Deposit in transit 3,100 5.Returned cheque 1,800 2,250

7. Error on cheque deduction 1,950 5,050 18,060

Less 1. Deposit recorded lower than

the true amount 2,700

6.1 Note receivable 5,000

6.2 Interest income 300 8,000

Corrected Balance 10,060 Corrected Balance 10,060

Accounting for Bill BUNYAWEE SUWANNABOOL

Prepare reconciliation from one party to another party can be done in 2 methods.

Method 1 Using reconciliation of the bank statement balance to business cash book balance

Mitrsiam shop

The bank overdraft statement

For 30 November 25x1

Overdraft Balance on Bank Statement 12,710

Add Outstanding Cheque 2,400

Note Receivable 5,000

Interest Income 300

Deposit recorded lower than the true amount 2,700 10,400

23,110

Deduct Deposit in transit 3,100

Error on cheque deduction 1,950

Bank service charges 450

Returned cheque 1,800 7,300

Total Overdraft balance on the business cash book 15,810

Method 2 Using reconciliation of business cash book balance to the bank statement balance

Mitrsiam shop

The bank overdraft statement

For 30 November 25x1

Overdraft balance on the business cash book 15,810

Add Deposit in transit 3,100

Error on cheque deduction 1,950

Bank service charges 450

Returned cheque 1,800 7,300

Deduct Outstanding cheque 2,400
Note Receivable 5,000
Interest income 300
Deposit recorded lower than the true amount 2,700 10,400

Total overdraft balance on the Bank Statement 12,710

Accounting for Bill BUNYAWEE SUWANNABOOL

Recording Adjusting Entry in General Journal

General Journal Page 5

Date Transactions A/C Debit Credit
No.
2,700 -
25x1 8,000 - 5,000 -
Nov 30 Bank account 300 -

¤ Cash 2,250 -
Note Receivable
Interest Income

Adjusted bill collection and recorded deposit to the
Bank lower than true amount

Account Receivable 1,800 -
Bank service charges 450 -

Bank account
Adjusted fee the bank charge to business and
Returned cheque

Accounting for Bill BUNYAWEE SUWANNABOOL

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BUNYAWEE SUWANNABOOL

22 Soi.Bangna – Trad 1, Bangna-Trad Rd. Bangna Distric, BKK