Bank Reconciliation
BANK RECONCILIATION STATEMENT
Introduction
You have now learnt how to balance the cashbook and to find the balance of the bank account. In this chapter we look at the way in which a business deals with any differences between the balance of the bank account in the cashbook and the closing balance of the bank account shown by the bank statement for the same period. These differences are explained by a document known as bank reconciliation statement. The bank reconciliation statement lists the items which are in the cashbook but not on the bank statement and, items which are on the bank statement but not in the cashbook. This process enables the business to update its cashbook and also helps to prove the accuracy of the bookkeeping of the business and the bank.
Objectives
By the end of this topic you should be able to:
i)
Compare transactions that appear on both cash book and bank statement ii) Identify causes of difference between cashbook and bank statement balance iii) Update cash book from details of transactions appearing on bank statement iv) Identify unpresented and uncredited cheque
v)
Calculate balance as per bank statement vi) Prepare a bank reconciliation statement
KEY TERMS
Bank reconciliation statement: A statement prepared to link the bank balance shown in the cashbook with the balance shown on the bank statement.
Timing differences: Differences between the bank statement and the cash book that will be corrected over time, such as unpresented cheques and outstanding lodgments.
Uncredited Cheques: Amounts that have been paid into the bank, but not yet recorded on the bank statement.
Unpresented cheques: Cheques that have been issued but have not yet been paid in and deducted from the account of the business
Purpose of bank reconciliation
One tool of maintaining proper record discipline is to ensure that all receipts are banked into the bank account intact. Banks sends to their customers a record of the transactions
Introduction
You have now learnt how to balance the cashbook and to find the balance of the bank account. In this chapter we look at the way in which a business deals with any differences between the balance of the bank account in the cashbook and the closing balance of the bank account shown by the bank statement for the same period. These differences are explained by a document known as bank reconciliation statement. The bank reconciliation statement lists the items which are in the cashbook but not on the bank statement and, items which are on the bank statement but not in the cashbook. This process enables the business to update its cashbook and also helps to prove the accuracy of the bookkeeping of the business and the bank.
Objectives
By the end of this topic you should be able to:
i)
Compare transactions that appear on both cash book and bank statement ii) Identify causes of difference between cashbook and bank statement balance iii) Update cash book from details of transactions appearing on bank statement iv) Identify unpresented and uncredited cheque
v)
Calculate balance as per bank statement vi) Prepare a bank reconciliation statement
KEY TERMS
Bank reconciliation statement: A statement prepared to link the bank balance shown in the cashbook with the balance shown on the bank statement.
Timing differences: Differences between the bank statement and the cash book that will be corrected over time, such as unpresented cheques and outstanding lodgments.
Uncredited Cheques: Amounts that have been paid into the bank, but not yet recorded on the bank statement.
Unpresented cheques: Cheques that have been issued but have not yet been paid in and deducted from the account of the business
Purpose of bank reconciliation
One tool of maintaining proper record discipline is to ensure that all receipts are banked into the bank account intact. Banks sends to their customers a record of the transactions