Question regarding the Bank Reconciliation statement.?

Question

In the event that the proper adjusting enteries were not recorded on the bank reconciliation what would be the effects on the income statement and balance sheet.
Thanks

Answer 1

It all depends on what was not adjusted. The balance per bank statement can be different from the bal per cash book for 2 main reasons: (1) there are items in the bank statement which were not recorded in the cash book, for e.g. bank charges and overdraft interest. If these were not adjusted in the cash book, then bank charges and overdraft interest expense in the income statement would be understated and the cash bal in the balance sheet would be overstated.
(2) there are items in the cash book which are not in the bank statement, for e.g. cheques deposited not cleared by the bank yet or cheques issued not presented by the payees. These do not require adjustment and have no effect either on the income statement or balance sheet.