Cheques & Bills Suspense head and its reconciliation

Cheques and Bills

·         It is a suspense head under the Major Head "L-Suspense and Miscellaneous" suspense accounts

·         Object: To keep a watch over the Cheques issued by a Railway.

·         What is Cheques & Bills ?   It is nothing, but similar to Bank A/c Operated in Commercial Accounts.

Example:  Salaries Rs. 20,000 /-paid by the firm through cheque.  Journal entry is as follows.

Date	Particulars	Debit	Credit
--	Salaries A/c	Rs.20,000
----	To Bank		Rs. 20,000

 In Railways, Salary of SSO/A Rs.20,000 paid by the Railways.

Date	Particulars	Debit	Credit
--	Erstwhile Demand No.03	Rs.20,000
----	To Cheques & Bills A/c		Rs. 20,000

·         The only difference between Commercial firms and Indian Railways is, that we operate Cheques and Bills A/c instead of Bank A/c.( Deposit with RBI A/c in case of Indian Railways)

·         Deposit with RBI A/c of Indian Railways is similar to Bank A/c of commercial firms

·         The reason is why Deposit with RBI A/c is not operated is that the cheques issued are not encashed immediately at the Bank and thereby affecting the Railway Account in RBI i.e., Deposit with RBI.

·         To keep a watch over the cheques and avoid excess payment, Cheques and Bills suspense A/c is operated.

Journal entries – Flow of Cheques and Bills Account

1.      When payments are made by Railways

Date	Particulars	Debit	Credit
--	Respective Demand No.__ Dr	Rs.20,000
----	To Cheques & Bills A/c		Rs. 20,000

2.      When individual Cheques are encashed by the parties at PSBs (Public Sector Banks)

Date	Particulars	Debit	Credit
--	Cheques & Bills A/c Dr	Rs.20,000
----	To PSB Suspense A/c		Rs. 20,000

Or Cheques & Bills A/c is Minus Credit

3.      When the PSBs (Public Sector Banks) adjust the amount of payment of encashed cheque against RBI (Reserve Bank of India)

Date	Particulars	Debit	Credit
--	PSB Suspense A/c Dr	Rs.20,000
----	To Deposit with RBI A/c		Rs. 20,000

Or PSB Suspense A/c is Minus Credit

·         Net of the above 3 journal entries is

Date	Particulars	Debit	Credit
--	Respective Demand No.__ Dr	Rs.20,000
----	To Deposit with RBI A/c		Rs. 20,000

Cheques and Bills Reconciliation :

Proforma

		January, 2018			February, 2018
Cheque No.	Date	Credit	Minus Credit	Credit Balance	Credit	Minus Credit	Credit Balance
001	01.01.2018	Rs.20000	-	Rs.20,000	-	Rs.20,000	Nil
002	02.01.2018	Rs. 1000	Rs.10000	Nil	-	-	-
003	03.01.2018	Rs.1000	Rs.10,000	(-) Rs.9,000	-	-	(-) Rs.9,000

·         The issued cheques are entered as Credit in the month of issue.  Whenever the cheque is encashed at the concerned bank, the same is entered as Minus credit in the month, it  encashed.

·         It always show Credit Balance and will represent the amount of unencashed cheques.   Suppose, in any case the balance against any cheque show Debit balance or Minus Credit balance, it is either fraud /excess of cash paid by the bank against the cheque. Example is Cheque No. 003 of the above table. This fraud or excess payment by the Banks is found only by reconciliation of Cheques & Bills.

·         The cheques drawn statement is prepared by the Accounts officer indicating the cheque number, the bank and the amount of cheques. The total amount of the cheque drawn is reconciled with the amount shown in the General Cash book under cheques & bills.

·         When Individual cheques are encashed: Public Sector Bank branches forward (through their Focal Point branch) Daily Main Scrolls accounting for individual cheques encashed.  After verification of the statement (either manually or through IPAS) received from focal point branch, the DMS-Date wise Monthly Statement, the amount there of will be adjusted.

·         Uncashed cheques for more than 6 months old, the amount cheques is written back from the Cheques and Bills Head duly transferring the same to Sundry earnings.

Date	Particulars	Debit	Credit
--	Cheques & Bills A/c Dr	------
----	To Sundry Earnings A/c		------

Or Cheques and Bills A/c is Minus Credited.

·         The monthly reconciliation  of cheques and bills is made and balance under the head "cheques and bills" at the end of every month is reconciled with the General books and a certificate of reconciliation is recorded on the final reconciliation register of cheques and bills under the signature of Gazetted officer.

• Para 444 of Accounts Code: 

1. Reviewed Cheques & Bills Suspense A/c Balance reviewed - every six months.

2. The amount of cheques, remaining uncashed for more than six months after the date of issue should be credited to 'Abstract Z 650 other unclassified or to the work concerned according as the transaction relates to working expenses or works respectively.

3. The particulars of all uncashed cheques so adjusted in accounts should be kept in a special register to be maintained for the purpose to facilitate disposal of requests for fresh cheques that may be received subsequently. 

 

·         Now, due to IPAS, the entire mechanism of Cheques and Bills Suspense Account is done through Programme.

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