BANK RECONCILIATION STATEMENT

‡ Bank Statement: This is a statement of account of a customer, sent by the bank, indicating deposits withdrawals and balances after each transactions. BANK RECONCILIATION STATEMENT: This is a statement prepared periodically to verify and reconcile a customer¶s cash book balance with the bank balance as shown on the bank statement. This is to check whether the two balances agree or not.

PREPARING BANK RECONCILIATION
STEPS: ‡ Prepare an adjusted or revised cashbook, by taking into account, items appearing in the bank statement but not in the cashbook. Examples of such items are: ‡ Dishonored cheques. ‡ Bank Charges ‡ Standing order ‡ Credit Transfer ‡ Errors of under cast or overcast ‡ Dividend received directly through the bank ‡ Banking overstated

Reasons why the cash book balances and Bank statement may disagree ‡ Dishourned Cheques:
A cheque is dishourned when a bank fails to effect payment Reasons For Dishonoring a Cheque: A Cheque may be dishonored for any of the following reasons: A figure and words of amount written differ Insufficient funds in the account Irregularity in signature from the specimen signature Uninvited alteration No date or incomplete date When a cheque becomes stale When a customer stops a cheques A post dated cheques is presented before maturity date When the cheques is mutilated.

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‡ Unpresented Cheques: These are cheques issued by the business for payment but are yet to be presented to the bank for payment. This normally appears in the cashbook as payment but does not appear in the bank statement. Uncredited Cheques: These are amounts taken out of customers account by the bank for services rendered on behalf of customers. Bank Charges: These are amounts taken out of customers account by the bank for services rendered on behalf of customers.

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‡ A Standing Order:
This refers to regular payment made by a bank at the request of a customer to certain persons or institutions. For example, instructing your bank to pay your light bill from your account every month. ‡ Credit Transfer: This refers to amount received by the bank on behalf of a customer directly through the bank account. ‡ Errors: These are mistakes committed by the accounts clerk of the business in the business cashbook or mistakes committed by the banker at the bank. For example, an account clerk may mistakenly write 985 instead of 895. Again banker may wrongly debit a business bank account instead of a different business bank.

Example
On 6th January 2001, Mr. Akrantie received his monthly bank statement for the month ending 31st December 2000. The bank statement contains the following details: Akrantie Bank Statement with Trust Bank

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2000 Dec1 Bal. b/f 5 Cash 12 Cheque 14 Cheque 410002 14 Sundries 15 Cheques 410003 19 Cash 26 Cash 29 Cheque 410005 30 Charges 31 Transfer Dr. Cr. Balance 2471.20 314 2785.20 375. 3160.20 3007.70 62.50 3070.50 2770.50 175 2945.50 425 3370.50 3130.50 3107.75 64 3171.75

152.50 300

240 22.75

For the Corresponding Period

Akrantie

Cashbook Contains the Following

2000

Cashbook (Bank Column) 2000
2471.20 314 375 62.80 175 425 74.70 Dec2 A Okusi 410001 358.25 13 Jang Ltd 410002 152.50 15 Cash 410003 300.00 29 B.Opro 410004 600.00 31 M.Pbot 410005 240.00 31 Bal.c/d 2246.95

Dec1. Bal b/f 5 Sales 12 Sales 14 G.Tijani 19 Sales 26 Sales 31 Bal.c/d

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You are required to prepare: 1. The revised cash Book. 2. The reconciliation.

Solutions
Revised Cash Book 2246.95 Bank Charges 64 Bal C/d 2310.95

Bal b/f Transfers

22.75 2288.20 2310.95

Bal.b/d

2288.20

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Bank Reconciliation Statement Bank as per adjusted Cash book Add Unpresented Cheques: A. Okusi 358.35 B. Opro 600 Less Uncredited cheque Balance as per bank statement Alternatively: 2288.20

958.25 74.70 3171.75

Note of Solution
2 Comparing the cashbook with the bank statement 22.75 (a bank charges), 64 transfers) were not in the cashbook. (These two items appeared in the bank statement but not in the cashbook). These were part of the differences: In the bank statement, 358.25 and 600.00 paid were not presented for payment while 64.00 from B.Okusi was not credited though they were recorded in the cashbook. These are therefore shown in the reconciliation statement.

Illustration 2
Dwamena a sole proprietor has just received his bank and is confused as to why his cash book show a balance of ¢36,930. Upon further enquires, the following information become available. 1. Three cheques received (¢10,740, ¢3180, ¢1350) were still in the office save even though credit has been taken for them. 2. A standing order for the payment of electricity charges of ¢7760 was paid by the bank. 3. The bank charged ¢510 for a cheque both supplied to Dwamena. 4. The bank had debited Dwamena account in error with ¢1160 5. A credit transfer of ¢46500 has been made in favor of Dwamena. This had been recorded in the bank statement only. 6. As at the date of receiving the bank statement the following cheques were recorded as paid had not been presented to the bank payment.

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Kootei Boakye Adai Baidoo 4700 4500 3680 3630

The bank received a telegraphic transfer to ¢830. This credited in error to Dwamena. You are required to prepare: 1. Adjusted Cashbook 2. Prepare a statement to reconcile the adjusted cashbook balances with the bank statement

Solution
Adjusted Cashbook Bal. b/d 36930 Standing order 7700 Credit transfer46500 Bank Charges 570 Bal c/d 75160

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Dwamena Bank Reconciliation Statement Balance as per adjusted cashbook Add Unpresented Cheques: Kootei Boakye Addai Baidoo 75160 1700 1500 3680 3630

Amount wrongly credited by the bank Less Uncredited Cheques: Total cheques in safe Amount wrongly debited by the bank

830

15270 1160

Balance as per bank statement

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