BHT1333 HOSPITALITY ACCOUNTING
Lecture 6: Bank Reconciliation
1 Cash Book
o Prepared by the proprietor/company to record the
business
transactions by cash and cheque.
o Debit receipts (deposits) and credit payments
(withdrawals).
2 Bank Statement
o Prepared by the bank and sent to clients at the end of each
month
(for current account only), itemising the opening balance,
deposits into and withdrawals from the account during
the period, and the closing balance.
o Debit withdrawals and credit deposits by the client.
o Clients who are overdrawn (debit balance) are short-term
receivables to the bank and clients with excess balance
(credit balance) are short-term payables to the bank.
3 Bank reconciliation statement
o Prepared by the proprietor/company to compare the Bank
Statement
with the Cash Book, in order to identify and explain the
errors and differences between the two and finally, to
reconcile the closing balances between the two.
o Bank reconciliation statement is a necessary internal
control activity that must be undertaken every month to
ensure that book-keeping records of the
proprietor/company are accurate and there are no errors
in the bank’s records.
4 Differences between the Cash Book and the Bank Statement:
(i) Bank charges/interest, other payments or receipts – items
in the Bank Statement not yet recorded in the Cash Book
1 DEGREE (HOSPITALITY)
of the business. The Cash Book will need to be revised.
o The bank might deduct bank charges for services
rendered to the business, such as bank overdraft
facilities, banker’s cheques/ bank draft, telegraphic
transfer of funds, etc.
o The bank might deduct stamp duty on cheque book.
o The bank might deduct bank interest on
loan/overdraft.
o The bank might deduct for direct debit payments (this
is an instruction by the business to the bank to make
direct payments for amounts owing to certain
suppliers).
o The bank might deduct for standing order payments
(this is an instruction by the business to the bank to
make certain fixed amount of payments every month,
such as insurance premium, rental, loan repayment
instalments, etc.
o The bank might add credit transfer, which is amount
paid by customers directly through bank transfer.
o The bank might add dividend/ interest received which
have been credited directly into the bank account.
o There might be other are transactions which the
business has not been informed about it until when
the Bank Statement is received.
BHT1333 HOSPITALITY ACCOUNTING 2 DEGREE (HOSPITALITY)

(ii) Time difference – items already recorded in the Cash Book,

not in appearing in the Bank Statement. The bank 5 Format of bank reconciliation statement:
reconciliation statement will need to be prepared to explain
the two types of transactions not yet taken up by the bank: Bank Reconciliation Statement as at …
RM RM
o Uncredited lodgement Balance as per Bank Statement X
There are some cheques received and deposited into the Add:
bank account, but not yet 'cleared'. This receipt has already Uncredited lodgement X
been debited into the Cash Book, but not yet Error by the bank X
acknowledged by the bank – although it will be in a very XX
short time when the cheque is eventually cleared. Less:
Unpresented cheque X
o Unpresented cheque Error by the bank X
There are some cheque payments where recipients have (XX)
delayed in depositing into their bank accounts. This Balance as per Cash Book XX
payment has already been credited from the Cash Book,
but not yet withdrawn from the bank account. Which amount should be shown in the
Statement of Financial Position as
(iii)Errors in calculation or recording incomes and payments –
! Quiz “Bank”
under current assets?
most errors are likely to be made by the business rather than
by the bank, but it is conceivable that the bank makes mistakes
too.

o Errors in the Cash Book

 recording errors, omissions, casting errors, entries on
 the wrong side (debit or credit side) 
 the Cash Book will need to be revised 

o Errors made by the bank

 cheque withdrawals from other clients wrongly
entered, deposits by other clients wrongly entered,
 errors in bank charges/interest 
 the bank reconciliation statement will need to explain
the errors 
BHT1333 HOSPITALITY ACCOUNTING 3 DEGREE (HOSPITALITY)

Lecture Illustration 1: Items in the Cash Book, not in the Bank Analysis of items in the Cash Book, not in the Bank Statement:
Statement
i) Uncredited lodgements (already debited in the Cash Book, but
Cash Book (bank columns only) not yet credited in the Bank Statement):
Cheque   Commission received RM780 
RM No. RM  T. Receivables RM1,200 
Balance b/d 2,500 Furniture 12501 600
Sales 800 T. Payables 12502 970 
Commission ii) Unpresented cheques (already credited in the Cash Book, but
not yet debited in the Bank Statement):
received 780 Purchases 12503 550
T. Receivables 1,200 Salary 12504 500   Cheque no. 12503 (Purchases) RM550 
Balance c/d 2,660  Cheque no. 12504 (Salary) RM500 
5,280 5,280
Balance b/d 2,660
Solution:

Bank Statement as at Bank Reconciliation Statement as at …

… RM RM
Balance as per Bank Statement
DR CR Balance
RM RM RM
Add: Uncredited lodgements
Balance 2,500 - Commission received
Cheque 12501 600 1,900
- T. Receivables
Cheque 12502 970 930
Deposit 800 1,730
Less: Unpresented cheques
- Cheque no. 12503
- Cheque no. 12504
Balance as per Cash Book
BHT1333 HOSPITALITY ACCOUNTING 4 DEGREE (HOSPITALITY)

Lecture Illustration 2: Items in the Bank Statement, not in the Cash

Book Solution:
(continuation from Lecture Illustration 1)
Revised Cash Book (bank columns only)
Cash Book – same as in Example 1. RM RM
Balance b/d Standing order
Bank Statement as at … Interest received Bank charges
Credit transfer Cheque book
Dr Cr Balance Dividend received Balance c/d
RM RM RM
Balance 2,500 Balance b/d
Cheque 12501 600 1,900
Cheque 12502 970 930
Deposit 800 1,730 Bank Reconciliation Statement as at …
Interest on fixed deposit 70 1,800 RM RM
Standing order 120 1,680
Bank charges 20 1,660 Balance as per Bank
Statement Add: Uncredited
Cheque book 15 1,645
lodgements
Credit transfer 250 1,895
- Commission received
Dividend received 105 2,000
- T. Receivables
Analysis of items in the Bank Statement, not in the Cash Book:
Less: Unpresented cheques
- Cheque no. 12503
i) Receipts in the bank account (already credited in the Bank
Statement, but not yet debited in the Cash Book) - Cheque no. 12504
 Interest on fixed deposit RM70  Balance as per revised Cash Book

  Credit transfer RM250 
 Dividend received RM105 
ii) Standing order (already debited in the Bank Statement, but not yet
credited in the Cash Book) RM120
iii) Bank charges (already debited in the Bank Statement, but not yet
credited in the Cash Book) RM20
iv) Cheque book (already debited in the Bank Statement, but not yet
credited in the Cash Book) RM15
BHT1333 HOSPITALITY ACCOUNTING 5 DEGREE (HOSPITALITY)

Lecture Illustration 3: Bank ii) Unpresented cheques (already credited in the Cash Book, but not
Overdraft yet debited in the Bank Statement):
  Equipment RM600 
Cash Book (bank columns only)  Mei Enterprise RM95 
2012 RM 2012 RM Analysis of items in the Bank Statement, not in the Cash Book:
Balance i) Receipts in the bank account (already credited in the Bank
May 15 Jaya Bhd 450 May 1 b/d 3,000 Statement, but not yet debited in the Cash Book)
28 Soda & Co 215 9 Johan Sdn Bhd 190   Interest RM55 
3,22  Direct credit RM950 
31 Balance c/d 0 18 Equipment 600 ii) Standing order (already debited in the Bank Statement, but not yet
25 Mei Enterprise 95 credited in the Cash Book) RM170
3,88 iii) Bank charges (already debited in the Bank Statement, but not yet
5 3,885 credited in the Cash Book) RM30
Balance Solution:
June 1 b/d 3,220
Revised Cash Book (bank columns only)
2012 RM 2012 RM
Bank Statement as at 31 May 2012 May 31 Interest received May 31 Balance b/d
“ Direct credit “ Standing order
Debit Credit Balance “ Balance c/d “ Bank charges
RM RM RM
May 1 Balance 3,000 Dr June 1 Balance b/d
11 J Ltd 190 3,190 Dr
18 Cheque 450 2,740 Dr Bank Reconciliation Statement as at 31 May 2012
20 Interest 55 2,685 Dr RM RM
Standing Balance as per Bank Statement
23 order 170 2,855 Dr Add: Uncredited lodgement
25 Bank charges 30 2,885 Dr - Soda & Co
31 Direct Credit 950 1,935 Dr
Less: Unpresented cheques
Analysis of items in the Cash Book, not in the Bank Statement: - Equipment
- Mei Enterprise
i) Uncredited lodgement (already debited in the Cash Book, but not Balance as per revised Cash Book
yet credited in the Bank Statement):
 Soda & Co RM215 
Lecture Illustration 5: Adjustments of error in the Cash Book
Solution:
As at 30 September 2011, the balance in the Cash Book of Warisan
Enterprise was RM80,515 on debit side. Bank Statement on the same (a) Revised Cash Book (bank columns only)
date showed a credit balance of RM111,230. R
2011 RM 2011 M
On investigation of the difference between the two sums, it was Sep 30 Balance b/d Sep 30 Balance c/d
established that: “ Error in Cash
(i) Cash book had been undercast by RM9,000 on the debit side. Book
(ii) Cheques deposited but not yet credited by bank amounted to
RM20,820. Oct 1 Balance b/d
(iii) Cheques drawn but not presented to the bank amounted to
RM42,535.
(b) Bank Reconciliation Statement as at 30 September 2011
Required: RM RM
(a) Show the correction to the Cash Book, Balance as per Bank
(b) Prepare a statement reconciling the balance per Bank Statement Add: Uncredited
Statement to the balance per Cash Book. lodgements

Less: Unpresented cheques

Balance as per revised Cash Book

Prepared by: NG KEAN WAI