Bank reconciliation statement

A. Bank reconciliations
 A comparison and adjustment between:

1. the bank balance recorded in the cash book, and

2. the balance appearing on the bank statement.

B. Bank statement

 A copy of document sent by the bank showing details of transaction

from the bank’s records.

Debit column of bank s/m Credit column of bank s/m

1. Bank charges 1. Cheques & cash deposits

2. Cost of cheque book issued
3. Standing orders
4. Direct debits
5. Interest charged by the bank
on customer’s bank overdraft
6. Cheques & cash payments
2. Direct credits /credit transfer
3. Dividend received from limited
company.
4. Interest paid on customer’s
bank balnace

C. Cash book

 Shows how much cash the business has in the bank.

D. Causes of difference between bank statement balance and the cash

book balance.

1. Errors in calculations or recording.

2. Items appear in the bank statement but not in the cash book.
e.g. bank charges, standing orders, direct debits, credit transfer.

3. Timing difference / items appear in the cash book but not in the bank
statement.
e.g. unpresented cheques, uncredited lodgement /deposits

Unpresented cheques - cheques issued out by the business but not

yet presented to the bank for payment.

Uncredited lodgements - cheques banked in but not yet recorded by

the bank.
E. Preparing a bank reconciliation statement

1. Update the cash book records

 With the items appear in the bank statement but not in the
cash book.

 Work out the corrected cash book balance.

2. Prepare bank reconciliation statement.

Corrected cash book balance xx

Add: Unpresented cheques xx
_____
xx
Less: Uncredited lodgements (xx)
_____
Balance as per bank statement xx
====

Or

Balance as per bank statement xx

Add: Uncredited lodgement xx
____
xx
Less: Unpresented cheques (xx)
____
Corrected cash book balance xx
===