chapter 9 - bank reconciliation

7/28/2019 CHAPTER 9 - Bank Reconciliation

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BANK RECONCILIATION


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DEFINITION

It is a statement, which is made

periodically by an enterprise. It isprepared by comparing the CashBook of the enterprise and the bank

statement.


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CONTD

Bank statement

Is a monthly report prepared by the bank

showing:The opening balance (b/d) from the previous bank

statement.

All the transactions that have taken place

The closing balance at the end of the month (c/d)


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The bank will credit any receipts from customersand debit any withdrawals of money.

Normally, the closing balance in the cashbook(bank column) does not agree with theclosing balance in the bank statement. Therefore itis necessary for the enterprise to prepare a Bank

Reconciliation Statement to reconcile thebalances.


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CONTD

CASH BOOK BANK STATEMENT

DEBIT DEPOSIT (RECEIPT)WITHDRAWAL(PAYMENTS)

CREDIT WITHDRAWAL(PAYMENTS) DEPOSIT(RECEIPT)


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PURPOSE OF PREPARING BSTo explain the difference between the bank balance as

recorded in the bank statement and the balance in thecash book (prepared by the company) at a particular

date.To ensure that the differences between the cash book

balance and the bank statement balance is due mainlyto timing differences in the entering of items.

As an aid to detect errors in either or both the cashbook and the bank statement if they still do not agreeafter doing the bank reconciliation statement.


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BANK A/c VS BANK STATEMENT

Reasons for the difference1) Errors made by the business

- should adjust the Cash Book

i. transaction have been credited in the bankstatement but not yet debited in the Cash Book

Example:

Interest received from saving accounts

Credit transfer (cash deposits or cheques) received onbehalf of the business by bank

Dividend received on behalf of customer by bank


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ii. transactions appeared on the debit side of thebank statement but not yet recorded on the creditside of the cash book

Example Charges paid for services provided by the bank

Charges for cheque books

Interest overdraft

Standing order Direct debits

Dishonoured cheques


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2)Errors made by the bank

should adjust the bank reconciliation statement

i. transaction s have been credited in the cash book

(money going out) but not yet debited in the bankstatement

i. Example:

-Unpresented cheque

The cheques paid to the creditors or suppliers and alreadycredited in the cash book but not yet debited in the bankstatement because the creditors have not yet presentedthem to the bank.


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ii.transaction s have been debited in the cash book(money received) but not yet credited in the bankstatement

Example:

- Uncredited cheque

The cash deposits or cheques received by the

business and have been debited in the cash bookbut not yet credited in the bank statement


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3)Errors made by both parties (the business and thebank)

should adjust both the cash book and the bankreconciliation statement


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ADJUSTED CASH BOOKDebit

Balance b/d

Credit Transfer

Dividend ReceivedInterest Received

Dishonoured Cheque

(payment to creditors)

Balance c/d (overdraft)

Credit

Balance b/d (overdraft)

Direct Debit

Standing OrderInterest on Overdraft

Dishonoured Cheque

(payment fron debtors)

Bank Charges

Interest Charges

Balance c/d


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XXX COMPANY

BANK RECONCILIATION STATEMENT AS AT .

Balance as per adjusted Cash Book xxx

Add: Unpresented Cheques xxx

Bank Error xxx xxxxxx

Less: Uncredited Cheques xxx

Bank Error xxx xxx

Balance as per Bank Statement xxx

chapter 9 - bank reconciliation

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