Adjustments of Cash Books - SS1 Accounting Lesson Note

When a bank statement is introduced, adjustments may need to be made to the cash book to ensure that the book balance matches the bank balance. This is because there may be differences between the transactions recorded in the cash book and the transactions recorded by the bank.

Adjustments to the cash book due to the introduction of a bank statement are necessary to ensure accurate record-keeping and to prevent errors in financial reporting. By reconciling the cash book with the bank statement, businesses can ensure that their financial records are up-to-date and accurate, which is crucial for making informed financial decisions.  To make these adjustments, the following steps can be taken:

• Compare the transactions recorded in the cash book with the transactions recorded in the bank statement. This will help identify any discrepancies or missing transactions.

Update the cash book to include any missing transactions that were recorded in the bank statement but not in the cash book.

Adjust the cash book to reflect any errors or discrepancies found between the cash book and the bank statement. For example, if there was an error in the amount of a transaction recorded in the cash book, this should be corrected to match the amount recorded in the bank statement.

Reconcile the cash book balance with the bank statement balance to ensure that they match. If they do not match, adjustments may need to be made to the cash book or bank statement to correct the balance.