The topic that is covered in this presentation is

Bank Reconciliation
The objectives of this presentation include enabling the users of this presentation : understand the differences between Bank Account & Bank Statement understand the concept of bank reconciliation and learn the differences that could arise between the two accounts perform the calculations to eliminate the differences between two accounts, and arrive at the matching balance in both accounts, which will be carried forward into the companys Statement Of Financial Position (SOFP) / Balance Sheet

Bank account is the accounting record, held in business ledgers, containing details of cash receipts coming into the business bank, and cash payments going out of the business bank. Bank statement is the accounting records, held and maintained by bank, on behalf of business, and keeps record of the cash received on behalf of business, and cash payments made on behalf of the business. For example: Babington College students paying their fees through their bank card, and hence the amount of fees receipts going straight into college bank account, college records this as a cash receipts into its ledgers, and bank would/should show up same amount, as received, on behalf of Babington College, on the bank statement it sends to Babington College. Babington College paying out its tax payable to government through its bank account, the accountant of Babington College should know what tax amount was paid to government , so it should be recorded correctly into the ledgers, and bank would/should show up same amount as paid, on behalf of Babington College, on the bank statement it sends to Babington College. Point to remember: Bank Account is held by the business, and Bank Statement is held by the bank, on behalf of business.

Bank reconciliation & the differences that could arise between Bank Account & Bank Statement
Bank reconciliation is the process of identifying the differences between bank account & bank statement, and correcting them once discovered. Following are the differences, that could arise between bank account & bank statement: Unpresented Cheques: cheques, which the business has issued to its suppliers, but the suppliers have not yet presented them at the bank Uncredited Lodgements: cheques, that the business received from its customers, but the bank has not yet cleared these cheques Dishonoured Cheques: cheques, which the business received from its customers, but the bank returned, meaning payment will never be made for these cheques Direct Debits: the automatic payments that come out of bank account, and business is mainly unaware of the amount of how much was paid out by the bank, so business would not be able to show up an amount of direct debit, until it receives the bank statement Recording Error: error made by either party, while making an entry with wrong amount

 Correcting the differences: Example: The bank account balance in the cash book of Babington College is 32,000, but the balance shown on the bank statement it received, is only 27,000. The accountant started processing the bank reconciliation, compared bank account with bank statement, and discovered following differences between bank account and bank statement: Babington College paid a cheque of 2,000 to tax authorities, but the tax authorities have not yet presented this cheque at the bank Babington College deposited a cheque of 4,000 into the bank, but it hasnt yet been cleared by the bank Babington College received a cheque amounting 5,000 from one of its students, but the bank returned the cheque stating the cheque did not hold valid signatures Electricity supplier of Babington College was paid 1,000 directly through bank, and Babington College was not aware of the amount, so it didnt record the direct debit Bank put an amount of 3,000 mistakenly into Babington College, which was supposed to be paid to another account holder

Advantages of BRS
Faster processing Requirement of less manpower Easy identification of errors

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