Accounting For All - (Chapter 7 Bank Reconciliation Statement)

CHAPTER 7
BANK RECONCILIATION STATEMENT

7.1 Introduction
You have learnt how a business keeps a record of its cash receipts and payments
in the cash journals (cash receipts journal and cash payments journal or bank
account). You also know that the bank keeps a similar record of these
transactions. In theory, the two records should be the same, but in practice this is
rarely the case.
In this section you will learn how to compare the bank’s records with the cash
journal records of the business and identify the differences that occur.
Outcomes
You should be able to:
 Reconcile the cash journals (cash book) of an entity with the bank statement
 Identify outstanding entries on the bank statement and in the cash
journals/cash book
 Identify errors on the bank statement and in the cash journals/cash book
 Compile a supplementary bank account
 Compile a bank reconciliation statement.
7.2 What is a bank reconciliation statement?

To reconcile means to ‛bring to agreement’ or make compatible. So when you do
a bank reconciliation you are ensuring that the records of the business agree with
the records of the bank.
The records of the business are contained in the cash receipts journal and the cash
payments journal (cash book) (bank account).
The records of the bank are reported in a monthly bank statement which is sent to
the business at the end of each month.
Copyright © 2018. Juta & Company, Limited. All rights reserved.
Drawing up a bank reconciliation statement brings the cash receipts and the cash
payments journals of the business in line with the bank statement.
The process ensures that all entries in the cash journals are accounted for in the
bank statement, and that all entries on the bank statement are accounted for in the
cash journals.
7.3 Comparing the records

To bring the records into agreement you first have to check that the items that
appear on the bank statement appear in the cash receipts journal and cash
payments journal (cash book) (bank account).
Schutte, Madri. Accounting for All, Juta & Company, Limited, 2018. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/ujlink-ebooks/detail.action?docID=6483479.
Created from ujlink-ebooks on 2023-02-28 02:26:16.
Accounting for All
A typical bank statement looks like this:

Rainbow Bank
Cluster traders
PO Box 321 Bank statement
Selby 2000 March 2016
Date and code Cheque Cheque and Deposits Balance
number other debits
R R R
Mar 1 3 000.00 3 000.00
Mar 1 CB 5.00 2 995.00
Mar 1 CO 8.10 2 986.90
Mar 2 2 650.00 5 636.90
Mar 4 021 38.40 5 598.50
Mar 5 SO 45.00 5 553.50
Mar 6 022 3 000.00 2 553.50
Mar 7 LF 11.20 2 542.30
Mar 10 023 300.00 2 242.30
Mar 15 1 100.00 3 342.30
Mar 16 024 80.50 3 261.80
Mar 17 025 1 930.00 1 331.80
Mar 26 5 810.00 7 141.80
Mar 26 026 550.10 6 591.70
Mar 30 028 133.45 6 458.25
Mar 30 IU 1 120.00 5 338.25
List of abbreviations:
CB = Cheque book SO = Stop order – insurance
CO = Commission LF = Ledger fees
IU = Item unpaid
One of the columns in the above statement is headed ‛Cheques and other debits’.
These represent cheques that Cluster Traders has issued to pay its expenses. They
are recorded in the cash payments journal of the business and are therefore credits
in the business’ records (credits on bank account will decrease bank).
The column ‘deposits’ on the bank statement will be the money that the business
has received. These transactions will be in the cash receipts journal of the
business and are therefore debits in the business’ records (debits on bank account
will increase bank).
So, entries in the cash receipts journal will appear as credits in the bank statement
(the bank owes you). Entries in the cash payments journal will appear as debits in
the bank statement (you owe the bank). OR: Debits in bank account will be
credits on the bank statement and credits in the bank account will be debits on the
bank statement.
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Chapter 7 Bank reconciliation statement
All receipts (debits) of the business will be credits on the bank statement. All
payments (credits) of the business will be debits on the bank statement.
Where a business makes use of a cash book or bank account, the cash receipts
journal represents the debit side of the cash book (bank account) and the cash
payments journal the credit side of the cash book (or bank account).
7.4 Reconciliation procedure

1. Compare each item on the bank statement with items in the cash receipts
journal and cash payments journal.
Mark the items which appear in both the bank statement and the cash
journals with a (^). These items are in agreement.
2. Go through the bank statement and look for any items not marked with a (^).
Mark these o/s for outstanding.
3. Make a list of all the o/s items on the bank statement.
Your list may include the following items:
 Service fees, bank charges
 Transaction levy
 Interest on overdraft
 Stop order payment
 Dishonoured cheques
 Interest paid by the bank
 Errors (wrong account debited or credited)
 Errors (wrong amounts).
4. The outstanding list of items is those items that appear on the bank
statement, but do not appear in the cash receipts or cash payments journals of
the business. These items must be entered into either the cash receipts
journal or the cash payments journal (sometimes referred to as the
supplementary cash journals). You are supplementing your books with the
information not yet recorded.
For example, service fees will be entered into the supplementary cash
payments journal. Interest paid by the bank will be entered into the
supplementary cash receipts journal.

5. When all o/s items have been entered in the supplementary cash journals you
can mark them with a (^) to show they are now in agreement. At this stage
all the items on the bank statement will be marked (^).
6. If all the items in the cash journals are also marked, then the balance shown
on the bank statement should agree with the difference between the total
columns of the cash receipts journal and cash payments journal.
Bank statement balance = Total cash receipts journal less total cash
payments journal
7. If the balances do not agree, the next thing to do is check the cash journals
for any unmarked items. These are items which appear in the cash journals of
the business but do not appear on the bank statement.
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8. Items which appear in the cash journals of the business but do not appear on
the bank statement are entered in a bank reconciliation statement.
9. Errors on the bank statement are corrected on the bank reconciliation
statement.
10. Errors made by the business in the CRJ and CPJ (or bank account) are
corrected in the supplementary bank account.
Example 7.1
Shown below are copies of the following documents:
 A bank statement for March
 Cash receipts journal
 Cash payments journal.
Rainbow Bank
Gunston Traders
PO Box 321 Bank statement
Selby 2000 March 2016
Date & code Cheque Cheque and Deposits Balance
number other debits
R R R
Mar 1 3 000.00 3 000.00
Mar 1 CB 5.00 2 995.00
Mar 1 CO 8.10 2 986.90
Mar 2 2 650.00 5 636.90
Mar 4 021 38.40 5 598.50
Mar 5 SO 45.00 5 553.50
Mar 6 022 3 000.00 2 553.50
Mar 7 LF 11.20 2 542.30
Mar 10 023 300.00 2 242.30
Mar 15 1 100.00 3 342.30
Mar 16 024 80.50 3 261.80
Mar 17 025 1 930.00 1 331.80
Mar 26 5 810.00 7 141.80

Mar 26 026 550.10 6 591.70
Mar 30 028 133.45 6 458.25
Mar 30 IU 1 120.00 5 338.25
CB = Cheque book CO = Commission
LF = Ledger fees SO = Stop order – insurance
IU = Item unpaid
234
Cash receipts journal

Date Particulars Folio Cash sales Accounts Sundries Analysis Total bank
receivable
Mar 1 Capital per
receipt 6 (11) 3 000.00 3 000.00
2 Cash sales 18–19 1 850.00 1 850.00
2 Accounts 800.00 800.00 2 650.00
receivable per 7
15 Cash sale 20 1 100.00 1 100.00
26 Accounts 5 810.00 5 810.00 5 810.00
receivable 8–12
30 Cash sale – 21 750.00 750.00 750.00
3 700.00 6 610.00 3 000.00 13 310.00
Cash payments journal

Date Cheque Particulars Folio Cash Accounts Sundries Total
no purchases payable bank
Mar 021 Van Schaiks (16) 38.40 38.40

4 Stationery
6 022 Sailboard Man
paid account 3 000.00 3 000.00
10 023 Rentkor – rent (17) 300.00 300.00
16 024 Petty cash (18) 80.50 80.50
17 025 New Wave Co
Cash purchase 1 930.00 1 930.00
26 026 Sailboard Sail Co –
account 550.10 550.10
27 027 Nedbank (19) 350.00 350.00
instalment
30 028 Strong Line Co
Cash purchase 133.45 133.45
31 029 Cash wages (20) 410.00 410.00
2 063.45 3 550.10 1 178.90 6 792.45

(14) (15)
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Carry out the following steps to see how the cash reconciliation statement is
drawn up from the bank statement, the cash receipts journal and the cash
payments journal.
1. Compare deposits in the bank statement with those in the cash receipts
journal.
2. Mark off the cheques on the bank statement that are also in the cash
payments journal.
3. Mark as outstanding any items on the bank statement that do not appear in
the cash journals. Make a list of them.
You should mark the following:
Cheque book (CB) R5.00

Commission (CO) R8.10
Ledger fees (LF) R11.20
Total bank charges = R24.30
Stop order – insurance (SO) R45.00
Unpaid cheque (IU) (accounts receivable) R1 120.00
4. Enter these items in the supplementary bank account. Remember, the bank
has already reduced the business’s account by these amounts.
Solution:
Dr Supplementary bank account Cr
Mar 31 Total CRJ 13 310.00 Mar 31 Total CPJ 6 792.45
Bank charges 24.30
Insurance 45.00
Accounts 1 120.00
receivable
(unpaid ch)
Balance c/f 5 328.25
13 310.00 13 310.00
Apr 1 Bal b/f 5 328.25
Mark these same items on the bank statement as no longer outstanding. All
items on the bank statement should now be marked.
5. Check the cash journals for unmarked items.
You should notice the following:
In cash receipts journal In cash payments journal

Cash sale on 30 Mar R750 Cheque no 27 R350.00
Cheque no 29 (cash wages)
R410.00
236
6. Prepare the bank reconciliation statement as at 31 March 2016.
Bank reconciliation statement as at 31 March 2016

Debit Credit
R R
Balance per bank statement 5 338.25
Debit outstanding cheques 027 350.00
029 410.00
Credit outstanding deposits 750.00
Balance per supplementary bank account 5 328.25
6 088.25 6 088.25
Remember that once you have recorded these items they

must still be posted to the ledger accounts.
7. Post to the ledger accounts and do a supplementary bank account.

Post to the following ledger accounts:
Accounts receivable R1 120.00
Bank charges R24.30
Insurance R45.00
Dr Insurance Cr
Mar 31 Bank CB10 45.00
Bank charges
Mar 31 Bank CB10 24.30
Accounts receivable
Mar 31 Bank CB10 1 120.00
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Explanation of example 7.1

Bank reconciliation statement as at 31 March 2016
Debit Credit
R R
Balance per bank statement 5 338.25
029 410.00
Balance per supplementary bank account 5 328.25
6 088.25 6 088.25
The R5 338.25 at the bottom of the bank statement (the last balance) is the
balance according to the bank at the end of the month. We always start the bank
reconciliation with this amount.
A favourable bank balance = credit balance

(the bank owes the business the money).
Unfavourable bank balance = debit balance
(the business owes the money to the bank, the business is in overdraft).
The outstanding cheques are cheques which appear in the cash payments journal,
but not on the bank statement. The cash payments journal is the same as the credit
side of the bank account, that is why it is a debit on the bank statement.
The outstanding deposits are those which appear in the cash receipts journal, but
not on the bank statement. The cash receipts journal is the same as the debit side
of the bank account, that is why it is a credit on the bank statement.
All entries which appear in the cash receipts journal but not on the bank statement
are a ‘debit’ in our books, which means they will be a credit on the bank
statement. This has to be entered on the bank reconciliation statement.
All entries which appear in the cash payments journal but not on the bank
statement are a ‘credit’ entry in our books, which means they will be a debit on
the bank statement. This has to be entered on the bank reconciliation statement.
The R5 328.25 balance per bank account will be the balance of the bank account
after all outstanding amounts (amounts appearing on the bank statement, but not
in our records) (CRJ and CPJ) have been entered into the supplementary CRJ and
CPJ (bank account). This will be the closing balance of the bank account of our
records carried forward to the bank reconciliation statement.
238
Example 7.2
Reconcile the bank statement with the bank account shown below.
Bank statement of J&J Ewing for September 2016

Date Particulars Debits Credits Balance
R R R
Balance 371.00
5 Deposit 500.00 871.00
Cheque 008 450.00 421.00
Cheque book 4.00 417.00
Service fee 0.60 416.40
7 Cheque 009 200.00 216.40
11 Deposit 192.00 408.40
Cheque 011 38.50 369.90
25 Deposit 400.00 769.90
Cheque 013 68.00 701.90
Service fee 1.00 700.90
Deposit 40.00 740.90
28 Cheque 014 34.76 706.14
29 S/O (insurance) 50.00 656.14
Cheque 015 375.00 281.14
Dr Bank account – September 2016 Cr

30/9 Balance b/f 371.00
4 Accounts receivable 500.00 2 Equipment 450.00
11 Accounts receivable 192.00 8 Purchases 200.00
25 Accounts receivable 400.00 10 Accounts payable 84.00
27 Rent paid 40.00 12 Stationery 38.50
30 Debtors 224.46 18 Telephone 35.20
24 Accounts payable 68.00
25 Freight 34.76
30 Salaries 375.00
30 Balance c/f 442.00
1 724.46 1 727.46
1/10 Balance b/f 442.00
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Solution:
You have to adjust the bank account with the items that appear on the bank
statement but are not yet recorded on the bank account.
The outstanding items are:

 Insurance R50.00
 Bank charges R5.60
Record these items in your supplementary bank account. These items must still
be posted to the ledger accounts.

Oct 1 Balance b/f 442.00 30 Bank charges 5.60
Insurance 50.00
Balance c/f 386.40
442.00 442.00
1 Balance b/f 386.40
Use the adjusted balance of R386.40 of the supplementary bank account to carry
forward to the reconciliation statement.
Bank reconciliation statement as at 30 September 2016

Debit Credit
R R
Balance per bank statement 281.14
012 35.20
Balance per supplementary bank account 386.40
505.60 505.60
On the bank reconciliation:

 We debit the cheques not yet presented for payment.
 We credit the outstanding deposits.
240
Explanation of example 7.2

1. Start the supplementary bank account with the closing balance of
September’s bank account (R442).
2. Debit the supplementary bank account with all credits on the bank statement
that do not appear on the debit side of our bank account (in this example
there were none).
3. Credit the supplementary bank account with all debits on the bank statement
that do not appear on the credit side of our bank account (eg insurance and
bank charges).
4. Calculate a new balance for the supplementary bank account.
5. Do the bank reconciliation, starting with the closing balance per bank
statement (R281.14).
6. Debit all outstanding cheques on the bank reconciliation statement. These
cheques/amounts appeared on the credit side of the bank account, but did not
appear on the bank statement.
7. Credit all outstanding deposits on the bank reconciliation statement. These
deposits appeared on the debit side of the bank account, but did not appear
on the bank statement.
8. Enter the closing balance of the supplementary bank account on the bank
reconciliation statement (R386.40).
9. The debit column and the credit column of the bank reconciliation statement
are supposed to add up to the same amount.
Remember: a business can either do a CRJ and CPJ or a bank account. The CRJ
is like the debit side of the bank account and the CPJ is like the credit side of the
bank account.
7.5 Comparison of the bank statement with the cash receipts

journal and cash payments journal (or the bank account)
of the current month with the bank reconciliation
statement of the previous month
When a bank reconciliation statement is prepared in successive months (as occurs

in practice), the bank statement should be compared with the previous month’s
bank reconciliation statement.
The following should be noted:
 The entries on the bank reconciliation statement for month one, such as
outstanding deposits and outstanding cheques, will probably appear on the
bank statement for month two (the next month).
 When the bank statement for month two is received, it must first be compared
with the bank reconciliation statement for month one and then with the cash
book or bank account for month two.
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 A cheque which has not been presented may appear in the bank reconciliation
statement for more than one month. A cheque usually expires after six months
– only then is it not paid by the bank.
These points are clearly illustrated in the following exercise.
Example 7.3
Use the information in the books of Naidoo Traders to complete the following:
7.3.1 Compare the bank statement with the bank reconciliation statement on
31 July and with the bank account for August.
7.3.2 Prepare a supplementary bank account.
7.3.3 Prepare the bank reconciliation statement on 31 August 2016.
Information:
1. Bank reconciliation statement as at 31 July 2016
Debit Credit
R R
Balance per bank statement 6 780
Debit outstanding cheques 326 295
328 1 325
330 3 450
Credit outstanding deposits 7 275
Balance per supplementary bank account 8 985
14 055 14 055
2.
Dr Bank account – August 2016 Cr
Balance b/d 8 985 331 7 Telephone 274
7 Accounts 5 293 332 7 Wages 1 800
receivable 333 8 Purchases 7 275
14 Sales 6 275 334 10 Accounts payable 5 560
21 Accounts 6 979 335 12 Stationery 3 385
receivable 336 14 Wages 2 100

28 Accounts 8 555 337 20 Equipment 3 600
receivable 338 21 Wages 2 200
31 Sales 7 440 339 24 Accounts payable 6 345
340 28 Wages 2 300
341 30 Drawings 1 000
342 31 Purchases 3 360
343 31 Accounts payable 4 440
31 Bal c/f 112
43 527 43 527
1 Bal b/f 112
242
3. Items which appear on the bank reconciliation statement of July but still not
on the bank statement of August:
Cheque no: 326 – R295. This amount must be entered onto the bank
reconciliation statement of August.
4. Items on the bank account of August not on the bank statement of August:
Deposit R7 440
Cheque numbers 341 R1 000
342 R3 360
343 R4 440
RSA Bank Ltd – August 2016

5. Bank statement of Naidoo Traders
Credits (+)
(deposits, etc)
Debits (–)
Description (cheques, etc) Date Balance
R R
Balance brought forward 2016-08-01 6 780.00
Previous bank recon (credit) 7 275.00+ 2016-08-01 14 055.00
Cheque no 328 1 325.00– 2016-08-01 12 730.00
Cheque no 330 3 450.00– 2016-08-02 9 280.00
Cheque no 331 274.00– 2016-08-02 9 006.00
Cheque no 332 1 800.00– 2016-08-07 7 206.00
Accounts receivable (credit) 5 293.00+ 2016-08-07 12 499.00
Service fee 115.00– 2016-08-08 12 384.00
City Council 267.00– 2016-08-09 12 117.00
Cheque no 333 7 275.00– 2016-08-09 4 842.00
Cheque no 335 3 385.00– 2016-08-12 1 457.00
Cheque no 334 5 560.00– 2016-08-13 – 4 103.00
Cheque no 336 2 100.00– 2016-08-14 – 6 203.00
Sales (credit) 6 275.00+ 2016-08-14 72.00
Unpaid cheque 250.00– 2016-08-15 – 178.00
Credit card levy 24.00– 2016-08-16 – 202.00
Credit – rent 1 500.00+ 2016-08-17 1 298.00
Cheque no 337 3 600.00– 2016-08-20 – 2 302.00
Cheque no 338 2 200.00– 2016-08-21 – 4 502.00

Cheque no 339 6 345.00– 2016-08-25 – 3 868.00
Cheque no 340 2 300.00– 2016-08-29 2 387.00
Interest on credit balance 123.00+ 2016-08-30 2 510.00
Levy on debit transactions 18.00– 2016-08-31 2 492.00
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Note:
1. The payment of R267 to the City Council is for a debit order for
water and electricity.
2. The unpaid cheque was received from S Samuels on 14 August and
dishonoured on account of insufficient funds.
3. The credit of R1 500 on the bank statement on 17 August is for rent
deposited directly by the tenant.
6. Items on the bank statement of August not on the bank account of
August:
Service fee R 133
Credit card levy R 24
Bank charges R 157
S Samuels (unpaid cheque) R 250
Water & electricity R 267
Rent received R1 500
Interest received R 123
Follow these steps:

1. Comparing the bank reconciliation statement of July with the bank statement
of August, you will notice that the ‘balance per bank statement’ (R6 780) on
the bank reconciliation statement of July is the same amount with which the
bank statement of August started.
The balance on the bank account on the bank reconciliation statement of July
(R8 985) is the same as the balance with which the bank account of August
started.
2. Check if all the outstanding cheques on the bank reconciliation statement of
July numbers 326, 328 and 330 appear on the bank statement of August.
You will find that cheque number 326 for R295 is still outstanding. This
means that this cheque should be entered into the bank reconciliation
statement of August as well.
3. Check if the outstanding deposits on the bank reconciliation statement of
July (R7 275) appear on the bank statement of August.
Yes, all outstanding deposits of the previous month do appear on the bank
statement of the current month (August). Thus there are no entries to be
made.
4. Compare the bank statement of August with the bank account of August as
per example 6.2.
5. Compile the supplementary cash book and the bank reconciliation statement
for August as per example 6.2.
244
Solution:
31 Rent 1 500 Balance b/f 112
Interest 123 Bank charges 157
Accounts receivable 250
Water & electricity 267
Balance c/f 837
1 623 1 623
1 Balance b/f 837
Bank reconciliation statement as at 31 August 2016

Debit Credit
R R
Debit outstanding cheques 326 295
341 1 000
342 3 360
343 4 440
Credit outstanding deposits 7 440
Balance per supplementary bank account 837
9 932 9 932
The purpose of a bank reconciliation is to ensure that the records of the business
(contained in the bank account) agree with the records of the bank (reported in the
bank statement).
The records may differ because of:
 Differences in timing and content
 Errors in recording.
The bank reconciliation statement brings the records in the cash receipts and
payments books (cash book or bank account) into line with the bank statement so
that the correct bank balance is calculated.
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Questions
Question 7.1
Dr Bank account of L Tshebe for August 2016 Cr
Doc Date Details Fol Amount Doc Date Details Fol Amount
no no
1 Balance b/f 479.30 188 1 Accounts 280.00
payable
2 Deposit 313.00 189 6 Purchases 494.00
10 Deposit 587.30 190 10 B Brown 176.55
14 Deposit 300.00 191 15 Transport
20 Deposit 484.45 costs 85.00
31 Deposit 296.65 P Pelser
(cheque
refused) 65.00
192 20 Printing
costs 110.00
193 26 Telephone 28.40
194 29 W Willers 410.20
195 31 Salaries 520.00
Balance c/f 291.55
2 460.70 2 460.70
1 Balance b/f 291.55
246
Bank statement of L Tshebe for August 2016

Date Transaction description Debit Credit Balance
Aug R R R
1 Balance 479.30
Deposit (receivable) 181.94 661.24
2 Deposit (receivable) 313.00 974.24
3 Cheque no 188 280.00 694.24
7 Cheque no 189 494.00 200.24
Cheque book fees 14.20 186.04
Debit order (insurance) 166.40 19.64
10 Deposit 587.30 606.94
14 Deposit order (salary) 300.00 306.94
Cheque unpaid (P Pelser) 65.00 241.94
Bank charges 1.10 240.84
Deposit (bill receivable) 300.00 540.84
17 Cheque no 190 176.55 364.29
20 Deposit 484.45 848.74
25 Cheque no 191 85.00 763.74
28 Deposit (rent) 110.00 873.74
Bank charges 8.50 865.24
31 Cheque no 195 520.00 345.24
Cheque unpaid (V Vos) 25.49 319.75
Remarks:
1. Deposit on the first was made by a receivable, A Spies.
Required:
Prepare the supplementary bank account and the bank reconciliation at the end of
August 2016.
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Question 7.2
Bank statement of K Kumalo, 862 Code Avenue, Pretoria for Sept 2016
Date Numbers Debit Credit Balance
R R R
1/9/2016 1 200
5/9/2016 250 1 450
6/9/2016 810 210 1 240
9/9/2016 620 1 860
12/9/2016 811 32 1 828
18/9/2016 813 52 1 776
80 1 856
20/9/2016 812 644 1 212
21/9/2016 S/F 1 1 211
C/U 80 1 131
28/9/2016 840 1 971
816 300 1 671
29/9/2016 815 24 1 647
S/O 250 1 397
30/9/2016 100 1 497
S/F 2 1 495
C/B 8 1 487
C/B = Cheque book Int = Interest
R/D = Refer to drawer S/O = Stop order
C/U = Cheque unpaid E/C = Error corrected
S/F = Service fee S/D = Sundry debits
Dr The bank account of K Kumalo for September 2016 Cr

Doc no Date Details Fol Amount Doc no Date Details Fol Amount
1 Balance b/f 1 200 810 3 P Prins 210
D8 5 Deposit 250 811 9 Stationery 32

D9 8 Deposit 620 812 12 Purchases 644
D10 18 Deposit 80 813 Fuel 52
D11 28 Deposit 840 814 21 S Louw 106
D12 30 Deposit 240 815 25 Telephone 24
816 28 Salaries 300
817 Purchases 200
30 Balance c/f 1 662
3 230 3 230
1 Balance b/f 1 662
248
Additional information:
 The unpaid cheque of R80 on 21 September 2016 was received from
K Kostner, a receivable, and was deposited on 18 September 2016. The
dishonoured cheque and a debit note were attached to the bank statement.
 The stop order of R250 on 29 September 2016 is for an insurance premium
paid monthly.
 The deposit of R100 on 30 September 2016 is for rent which the tenant,
P Nel, paid directly into the bank account of K Kumalo.
Required:
Compile the supplementary bank account for September 2016 and prepare a bank
reconciliation at 30 September 2016.
Question 7.3
The following information was taken from the records of Circle Ltd:
Summary of entries on the debit side of the bank account for December 2016
Date Details Bank
R
1 M Matla 3 000
3 W Willemse 7 500
4 Commission received 500
7 Rent received 4 000
8 M Hanza 2 200
12 C Jamwell 2 800
20 000
Summary of entries on the credit side of the bank account for December
2016
Date Details Cheque Bank
no
R
4 D Sheepers 150 500

7 Inventory 151 2 400
12 Water & electricity 152 1 600
15 A le Roux 153 80
16 Salaries and wages 154 1 250
18 Telephone 155 250
20 Rent paid 156 2 300
21 Inventory 157 7 300
23 M Norton 158 920
16 600
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Bank reconciliation statement as at 30 November 2016

Debit Credit
R R

Debit: outstanding cheques
No 140 2 200
No 145 2 800
No 146 1 000
Credit: outstanding deposits 1 700
Balance per supplementary bank account 500
6 500 6 500
Bank statement for the month of December 2016

Date Details Debit Credit Balance
R R R
1 Balance 4 800 Cr
1 Deposit 1 700 6 500
2 Deposit 3 000 9 500
4 Deposit 7 500 17 000
5 150 500 16 500
5 140 2 200 14 300
6 Deposit 500 14 800
8 146 1 000 13 800
9 151 2 400 11 400
10 Deposit 4 000 15 400
11 Deposit 1 200 16 600
13 152 1 600 15 000
16 153 80 14 920
16 154 1 250 13 670
20 155 250 13 420
24 157 7 300 6 120
26 D/O 170 5 950

30 Interest 25 5 975
31 Bank charges 430 5 545 Cr
Additional information:
1. The deposit on 11 December was made by a receivable, Mr Barnardo, who
paid the amount directly into the business’s bank account.
2. The debit order is for insurance.
Required:
Prepare the supplementary bank account and the bank reconciliation statement for
December 2016.
250
Question 7.4
The following information was obtained after comparing the cash books of XYZ
(Pty) Ltd, with their bank statement on 31 October 2016:
2016
Oct 1 Bank account balance on 31 October 2016, R780 (Cr).
3 Unfavourable balance per bank statement, R1 167.
4 The bank debited the company’s account with a cheque drawn by VWX
(Pty) Ltd by mistake, R240.
5 A deposit of R87 which was paid directly into the company’s account by
receivable D Buys, has not yet been recorded in the books.
6 Cheque no 330 for R303, issued on 14 October 2016, has not been
presented to the bank for payment.
7 A deposit of R400 recorded in the bank account does not appear on the
bank statement.
8 Bank charges of R32 and bank interest of R17 appear on the bank
statement, but have not been recorded in the records of XYZ (Pty) Ltd.
9 No entry has been made in the company’s records relating to a cheque
returned by the bank and marked ‛refer to drawer’. The cheque amounted
to R88 and was received from S van Wyk in settlement of his account.
Required:
7.4.1 Compile the supplementary bank account.
7.4.2 Beginning with the balance per bank statement, prepare the bank
reconciliation as at 31 October 2016.
251
Accounting for All
Question 7.5
After comparing the cash book for September 2016 and bank reconciliation
statement at 31 August 2016 of G Giant with their bank statement at
30 September 2016, the following differences were found:
R
1. Debit balance of the bank account in general ledger at 5 869
30 September 2016
2. Favourable balance as per bank statement at 30 September 2016 7 394
3. Items that appeared on the bank reconciliation statement at
31 August 2016 but not on the bank statement of September 2016:
3.1 Cheque no 214 issued to a payable on 28 July 2016 202
4. Items that appeared in the bank account, but not on the bank
statement:
4.1 A deposit by G Giant on 30 September 2016 4 833
4.2 Cheque no 288 619
5. Items that appeared on the bank statement but not in the bank account:
5.1 Bank charges (ledger fees) 53
5.2 Interest on bank overdraft 72
5.3 A stop order in respect of an annual donation to the University
of Pretoria 300
5.4 An R/D cheque that was originally received from receivable
John Silver 440
5.5 A deposit which was paid directly into the bank account of
G Giant by a tenant, Peter Gold 2 800
6. Cheque no 197 for R345 issued on 15 March 2016 is stale and must be
cancelled. The cheque was issued to C Cloud for an advertising campaign.
7. The bank credited, erroneously, the account of G Giant with a deposit for
White Shark for R3 707.
8. Cheque no 273 issued to a payable B Taylor for R1 850 was erroneously

entered on the credit side of the bank account as R1 400.
Required:
7.5.1 The supplementary bank account for September 2016.
7.5.2 The bank reconciliation statement at 30 September 2016.
252
Question 7.6
The given information was taken from the books of Flintstone after the bank
account had been compared with the bank statement but before any corrections or
supplementary entries were made. Take the differences between the bank account
and the bank statement into consideration and do the following:
7.6.1 Prepare the supplementary entries in the bank account for 31 August
2016.
7.6.2 Take the given information into consideration and prepare the bank
reconciliation statement at 31 August 2016.
Bank reconciliation statement of Flintstone as at 31 July 2016
Debit Credit
R R
Debit balance according to the bank statement 144
Credit outstanding deposit 900
Debit cheques not yet presented for payment:
No 400 238
No 406 766
No 407 454
Credit balance per supplementary bank account 702
1 602 1 602
After the necessary comparisons were made, the following was found:
1. Debit side total of bank account (total money received during August 2016),
R29 100.
2. Credit side total of bank account (total money paid during August 2016),
R24 440.
3. The debit side of the bank account showed a deposit of R946 on 30 August
2016 which does not appear on the bank statement of August 2016.
4. The credit side of the bank account showed the following cheques which had
not yet been presented to the bank for payment:
No 416 – R788
No 439 – R540
5. A cheque received from Charlie Brown for R396 was returned by the bank
on 28 August 2016 marked ‛R/D’.
6. Cheque no 400 for R238 was issued in March 2016 in favour of ‛Good
News’ for an advertisement. The advertisement was not placed. Payment of
the cheque was stopped and must be cancelled.
7. Cheque no 620 for R490 was received from Garfield on 26 August 2016 and
deposited. This cheque was dishonoured by the bank because it was post-
dated for September 2016. This cheque was held for redepositing later.
253
Accounting for All
8. The bank statement had the following transactions, but they did not appear
on the bank account of August 2016:
 Little Lotta deposited the rental for August 2016 of R1 200 directly into
the bank account of the business.
 A stop order in favour of Superb Insurance for fire insurance, R500.
 A deposit of R760 which was erroneously deposited into the bank
account of Flintstone instead of Flightstone.
 A cheque for R150 drawn on the personal account of Fred Flintstones
(the owner), was debited to the business bank account in error.
 Cheque no 224 for the amount of R196, drawer P Jonty, was received
on 20 August 2016 and deposited. The cheque was dishonoured by the
bank due to insufficient funds.
 Service fees, R134, and interest on credit balance, R126.
 On 31 August 2016 the bank statement showed a balance of R5 564 (Cr).
254
Question 7.7
Use the given information to do the following in the books of Visser Stores:
7.7.1 Complete the supplementary bank account for June 2016.
7.7.2 Prepare the bank reconciliation statement at 30 June 2016.
Bank reconciliation statement of Visser Stores as at 31 May 2016
Debit Credit
R R
Debit balance as per bank statement 2 072.65
Credit outstanding deposit 1 570.73
Debit cheques not presented for payment:
No 3928 225.00
No 4162 477.90
No 4169 309.00
Credit post-dated cheque deposited 367.50
Debit amount credited by mistake 163.50
Credit balance per supplementary bank
account 2 880.55
3 248.05 3 248.05
Additional information in respect of the bank reconciliation statement:
 Cheque 3928 was issued in favour of ML Sports Club as a donation. The
club has ceased to exist.
 The bank statement for June was received on 30 June 2016 and showed a
debit balance of R1 557.40. The bank account showed a debit balance of
R1 320 on 30 June 2016. A comparison of the bank statement for June with
the bank account for June exposed the following differences:
1. Entries on the bank statement which do not appear on the bank account:
Credit entries:
Deposit, R1 000. (This amount was deposited on the current account by
the lessee, P Els.)
Debit entries:
Error corrected, R163.50.
Unpaid cheque, R2 457.12. This cheque was received from S Roux. The
cheque was dishonoured because of insufficient funds.
Unpaid cheque of R187 from A Cube because of insufficient funds.
Stop order, R136.35. (This stop order is in favour of WAG Insurance

Company for an insurance premium.)
255
Accounting for All
Unpaid cheque, R78.50. (This cheque was not signed by the drawer,
K Loubser. As soon as Loubser signs the cheque it will be redeposited.)
Cheque 9908, R45. (The drawer of this cheque is Victor Stores and not
Visser Stores.)
Cash handling fee, R7.80.
Tax levy, R6.90.
Service fees, R36.50.
Interest on overdraft, R24.33.
2. Entries on debit side of bank account which do not appear on the bank
statement:
Deposit, R2 427.30.
3. Entries on credit side of bank account which do not appear on the bank
statement:
Cheque 4209, R361 (dated 27 June 2016).
Cheque 4211, R479 (dated 10 July 2016).
4. Errors traced:
Cheque 4200 for R327, issued in favour of JJ Motors on 25 June 2016
to pay for repairs, was entered on the credit side of the bank account as
R372. The correct amount of this cheque is R327.
Question 7.8
The following information was taken from the records of Delta Traders on
31 October 2016.
On 31 October 2016 the bank account had a balance of R2 260. On 31 October
2016 the bank statement had a favourable balance of R1 316.
From a comparison between the bank statement and the bank account for October
2016, the following differences were noted:
1. Cheque no 530, issued on 20 September 2016 for R400 in favour of City
Primary School as a donation, had not yet been cashed on 31 October 2016.
On enquiry it was found that the cheque was lost. The cheque must be
cancelled and replaced by cheque no 670 (issued on 31 October 2016).
2. A deposit of R2 970 had not yet been credited by the bank.
3. The bank statement showed the following bank charges:
Service fees, R47.
Tax levy, R3.
Cash handling fee, R17.
Interest on bank overdraft, R22.
4. The bank statement showed an amount of R600 that was deposited by Lorna
Hairdressers in the current account of Delta Traders as rent for the building.
256
5. The bank statement showed the following stop orders: R150

for the monthly premium to Perfect Insurers for insurance on the business.
R70 for the monthly premium to Insure, paid on behalf of the owner for his
personal insurance.
6. The bank statement showed an unpaid cheque for R250 that was received on
15 October from Z Zola and dishonoured because of insufficient funds.
7. Cheque no 619 was issued on 28 October 2016 to the Postmaster in payment
of the telephone account. On the bank statement the amount of this cheque
was correctly entered as R96. It was, however, incorrectly entered on the
credit side of the bank account as R69.
8. The following cheques were not yet presented for payment on 31 October 2016:
No 633 R570
No 645 R718
No 663 R 66
No 665 R120
9. An amount of R138 as interest on a fixed deposit was paid directly into the
business’ current account by AE Building Society.
Required:
7.8.1 Prepare the supplementary bank account in the general ledger and balance
the account on 31 October 2016.
7.8.2 Prepare the bank reconciliation statement on 31 October 2016.
257

Accounting For All - (Chapter 7 Bank Reconciliation Statement)

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Accounting For All - (Chapter 7 Bank Reconciliation Statement)

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CHAPTER 7

BANK RECONCILIATION STATEMENT

7.2 What is a bank reconciliation statement?

7.3 Comparing the records

A typical bank statement looks like this:

7.4 Reconciliation procedure

supplementary cash receipts journal.

Mar 26 5 810.00 7 141.80

Cash receipts journal

3 700.00 6 610.00 3 000.00 13 310.00

Cash payments journal

Mar 021 Van Schaiks (16) 38.40 38.40

2 063.45 3 550.10 1 178.90 6 792.45

You should mark the following:

Cheque book (CB) R5.00

5. Check the cash journals for unmarked items.

You should notice the following:

In cash receipts journal In cash payments journal

6. Prepare the bank reconciliation statement as at 31 March 2016.

Bank reconciliation statement as at 31 March 2016

Remember that once you have recorded these items they

7. Post to the ledger accounts and do a supplementary bank account.

Explanation of example 7.1

A favourable bank balance = credit balance

Bank statement of J&J Ewing for September 2016

Dr Bank account – September 2016 Cr

The outstanding items are:

Dr Supplementary bank account Cr

Bank reconciliation statement as at 30 September 2016

On the bank reconciliation:

Explanation of example 7.2

7.5 Comparison of the bank statement with the cash receipts

When a bank reconciliation statement is prepared in successive months (as occurs

receivable 336 14 Wages 2 100

RSA Bank Ltd – August 2016

Cheque no 338 2 200.00– 2016-08-21 – 4 502.00

Follow these steps:

Bank reconciliation statement as at 31 August 2016

Bank statement of L Tshebe for August 2016

Dr The bank account of K Kumalo for September 2016 Cr

D8 5 Deposit 250 811 9 Stationery 32

4 D Sheepers 150 500

Bank reconciliation statement as at 30 November 2016

Balance per bank statement 4 800

Bank statement for the month of December 2016

26 D/O 170 5 950

8. Cheque no 273 issued to a payable B Taylor for R1 850 was erroneously

Unpaid cheque of R187 from A Cube because of insufficient funds.

Stop order, R136.35. (This stop order is in favour of WAG Insurance

5. The bank statement showed the following stop orders: R150

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