Bank Reconciliation Statements

Bank Reconciliation Statements

When are they necessary?

When the closing balance in the bank column of the cash book is different to the balance on that date per the bank statement.

Reasons for the difference.

• Lodgements not yet cleared by the bank. • Cheques paid out but not yet presented to the bank. • Direct debits • Standing orders • Credit transfers • Bank charges • Dishonoured cheques.

Bal. as per bank statement 875

Deduct
Unpresented cheques 256
Credit transfers 56

Add
Uncleared lodgements 115

Balance as per cash book 678

Bal. as per cash book 678

Add
Unpresented cheques 256
Credit transfers 56

Less
Lodgements not yet cleared 115

Bal. as per bank statement 875

Cash at bank per cash book 678
Unpresented cheques 256
Lodgements not yet cleared 115
Credit transfers on the bank statement but not the cash bk. 56
Bal. per the bank statement 875

Steps in the Bank reconciliation Process;

• Check the bank statement against the cash book • All items on the bank statement not in the cash book should be entered in the cash book. • Any errors discovered in the cash book should be corrected. • The bank reconciliation statement will then only include items in the cash book which have not yet appeared in the bank statement and any bank errors.
Note:

Where there is a bank overdraft the adjustments needed for reconciliation are the opposite to those needed for a positive balance .

Cash book: Dr balance = positive balance.
Cr balance = overdraft

Bank statement: Dr balance =
Overdraft
Cr Balance = positive balance

Reconciliation of ledger a/c’s with suppliers statements

Because of differences in timing, the balance on a suppliers statement on a certain date can differ from the balance on that suppliers