FINANCIAL ACCOUNTING

PRESENTATION_GROUP 4
BANK RECONCILIATON AND CHEQUES
 Name Registration Number
NALUSOZI KAREAN NAKAYE VU-DRE-2307-0546-EVE
NABISERE VICTORIA VU-BBA-2307-1002-EVE
KIZITO WILLIAMS VU-BHR-2307-0674-EVE
NDIFUNA AYUB VU-BTH-2307-0521-EVE
ISINGOMA JUMA VU-BOA-2307-0076-EVE
KABAHWEZA LYDIA NATULINDA VU-DTH-2307-0633-EVE
NADIOPE MARKFISH KITIMBO VU-BRE-2307-0416-EVE
LUBEGA DAVID VU-BTH-2307-0307-EVE
JOCELYN ROSEMARY VU-DBA-2307-0850-EVE
NABASUMBA JOVIA VU-BHR-2307-1045-EVE
HIRWA VIERA PATRICK VU-DBA-2307-0025-EVE
NABBOSA KEREEN SANYU VU-BTH-2307-0399-EVE
NAFUYE IVAN VU-BPL-2307-0368-EVE
NALUYIRIKA MARIA VU-DRE-2307-0635-EVE
Bank Reconciliation

• Is the process of matching and comparing figures from accounting

records against those presented on the bank statement.
• The aim is to reconcile the balances, identifying any difference
between the two in order to make appropriate adjustments or
collection.
• Therefore, Bank reconciliations verify the integrity of data
between the bank records and a company’s internal financial
records.
Bank Reconciliation Example
Importance of Bank Reconciliation

• Fraud Prevention
• When you have an automated, integrated, and centralized bank
reconciliation process, discrepancies between your books and the
bank can be discovered on a more frequent basis than just at month
end. This means that fraud can be detected as soon as it happens,
the team can take corrective action, and this tight-knit process will
make those thinking about committing fraud think again.
• Illustration: if an unauthorized withdraw of UGX5,000,000 was made
reconciliation provides a timely opportunity to contact the bank
and start an investigation.
Importance of Bank Reconciliation Cont’d

• It keeps the account in good standing

• Having a close eye on your company’s balance through bank
reconciliation statements means that you are less likely to spend
money you don’t have – causing you to overdraw or miss a
payment, and having a negative impact on your credit score.
• Many banks will also impose overdraft fees, meaning that bank
reconciliation statements can help to save money too. In addition,
regular bank reconciliation statements will help you to notice if the
bank starts charging you a new fee, allowing you to look into the
reasons why.
Importance of Bank Reconciliation Cont’d

• It helps with receivables tracking

• If your company has customers that still use a lot of cheques to
make payments, it is easy for these to be forgotten or misplaced.
Taking the time to complete a bank reconciliation statement
means that you are more likely to quickly notice if your own
accounts record payments from a customer but your bank account
does not.
Importance of Bank Reconciliation Cont’d

• Error detection
• It helps to identify any errors that may have occurred in the
company’s internal records or in the bank’s records.
• Illustration: imagine a business thinks they have UGX100,000,000
yet they have UGX 80,000,000 a reconciliation would reveal that a
deposit of UGX20,000,000 has not yet been processed by the bank
 Discrepancy Between Bank column balance and bank statement balance

• The banker might have allowed interest, received dividends which have
not yet been entered in our cash book. (Direct credits) which is income to
the business.ie cash inflow.
• The banker might have debited our account for any such item as interest
on overdraft, commission for collecting cheque, incidental charges etc.,
which we have not entered in the cash book. (Direct Debits) which is an
expense to the business. i.e., cash outflow
• That some of the cheque which we drew and for which we credited our
bank account prior to the date of closing, were not presented at the bank
and therefore, not debited in the bank statement. (Unpresented cheques
to the bank for payments. i.e., issued cheques)
 Discrepancy Between Bank column balance and bank statement balance Cont’d

• That some cheques or drafts which we have paid into bank for
collection and for which we debited our bank account, were not
realized within the due date of closing and therefore, not credited
by the bank. (Uncredited cheques with our bankers. Received
cheques.)
• The banker might have credited our account with amount of a bill
of exchange or any other direct payment into bank and the same
may not have been entered in the cash book.
• That cheques dishonored might have been debited in the bank
statement but have not been given effect to in our books.
Cheques

• A cheque, or check, is a document that orders a bank to pay a

specific amount of money from a person's account to the person in
whose name the cheque has been issued.
Key components of a cheque

• Drawer: The person who signs and instructs the bank to pay the amount
on the cheque.
• Drawee: The person who signs and instructs the bank to pay the amount
on the cheque. The drawee is the bank on which the cheque is drawn or
the person instructed to pay the amount mentioned on the cheque.
• Payee: The person to whom the money is to be given or the beneficiary.
• Amount: The amount required needs to be provided clearly in the
designated box.
• Serial Number: This is the number on the top right of the leaflet to
uniquely identify every cheque leaflet in a cheque book.
Other Essential Features of a Cheque

• Unconditional: A cheque is an order to pay and it is not a

request .The order must be unconditional.
• Validity: A cheque is normally valid for six months from the date it
bears. Thereafter it is termed as stale cheque. A post-dated or
antedated cheque will not be invalid. In both cases, the validity of
the cheque is presumed to commence from the date mentioned on
it.
• Cheque Maturity: In line with the enhanced cheque process by
Bank of Uganda (BoU), the duration of clearing cheques has
reduced from four to two working days.
Advantages and Disadvantages of Using a Cheque

Advantages
A Cheque is more secure and convenient to carry than cash.
It is a negotiable document that may be endorsed in favor of a third
party.
If misplaced, it can be quickly tracked.
Disadvantages
Cheques are not considered legal tender, payments made with them
may occasionally be rejected.
Cheques cannot be used by someone without a bank account.
You must visit the bank to deposit a cheque into your bank account,
which is time-consuming.
Why a Cheque may be dishonored

When a bank returns a cheque unpaid, it is called dishonor of cheque. It is said to be

honored if the bank gives the amount to the payee.
Below are the reasons why a cheque may be dishonored.

• When the signature is absent or the signature in the cheque does not match with the
specimen signature kept by the bank.
• Incase the account is frozen.
• If the fund in the bank account is insufficient to meet the payment of the cheque.
• When the court of law has given an order to the bank to stop payment on the cheque.
• If the amount written in words and figures does not match with each other.
• Incase the cheque is overwritten. i.e. any visible scribbling.
Why a Cheque may be dishonored Cont’d

• When the name of the payee is absent or not clearly written.

• If the account number is not mentioned clearly or is altogether absent.
• Incase the drawer orders the bank to stop payment on the cheque.
• If the drawer has closed the account before the payee presenting the cheque.
• When the bank receives the information regarding the death or lunacy or
insolvency of the drawer.
• If any alteration made on the cheque is not proved by the drawer by giving
his/her signature.