Final answer:
To compare Ram's Cash Book with the Statement of his overdraft account, carefully analyze the cash transactions recorded in Ram's Cash Book and reconcile them with the transactions shown in the Statement of his overdraft account. Look for any discrepancies and try to identify the reasons behind those differences. It is important to reconcile these two documents to ensure the accuracy of financial records and to identify any errors or discrepancies.
Step-by-step explanation:
In order to compare Ram's Cash Book with the Statement of his overdraft account, we need to understand what these two documents represent.
Ram's Cash Book is a record of all incoming and outgoing cash transactions for a specific period of time. It includes details of cash receipts and cash payments, and provides a clear picture of the cash position of the business.
The Statement of his overdraft account, on the other hand, is a summary of all transactions related to the overdraft facility provided by the bank. It shows the amount of funds that Ram has borrowed from the bank and the interest charged on that borrowing.
Now, if Ram's Cash Book showed an overdraft of ₹ 45,000, it means that the cash payments recorded in the Cash Book exceed the cash receipts by ₹ 45,000. This indicates that Ram has spent more cash than what he has received during the month of April 2019.
On the other hand, the Statement of his overdraft account will show the actual amount of the overdraft provided by the bank, which may or may not be the same as the overdraft shown in Ram's Cash Book. The bank may charge interest on the actual amount of the overdraft, which will also be reflected in the Statement.
To compare the two documents, you should carefully analyze the cash transactions recorded in Ram's Cash Book and reconcile them with the transactions shown in the Statement of his overdraft account. Look for any discrepancies and try to identify the reasons behind those differences.
For example, if Ram's Cash Book shows an overdraft of ₹ 45,000, but the Statement of his overdraft account shows an overdraft of ₹ 50,000, there could be a timing difference in recording the cash transactions or additional charges imposed by the bank.
It is important to reconcile these two documents to ensure the accuracy of financial records and to identify any errors or discrepancies. By doing so, Ram can have a better understanding of his cash position and his borrowing from the bank.