Learning Objectives

Explain the functions of a bank reconciliation statement Explain the causes of differences of the balance of the cash book and balance in the bank statement Update cash book Prepare a bank reconciliation statement

Methods of Payment and Receipt

Cheques receipt Bank interest income Credit transfer (C/T)

Cheques payment Bank charges Interest charges Standing order (S/O) Direct debit (D/D) or Autopay

Payment by Bank

Standing Order is the instruction given by the depositor to the bank to make regular payment with a fixed amount to a specific person automatically from the depositors bank account.

Direct debit or autopay is the instruction given by the depositor to his / her creditors bank to collect the money with a variable amount directly from the depositors bank account from time to time.

Record Transactions
Cash Book

Bank Statement

Receipt / Deposit - Dr. (increase in asset) Payment / Withdrawal - Cr. (decrease in asset)

Deposit - Cr. (increase in liability) Withdrawal - Dr. (decrease in liability)

Cheque
Post-dated cheque Stale cheque Dishonoured cheque Unpresented cheque Uncredited cheque / Uncredited deposit

Dishonoured Cheques

Cheques which cannot be converted as money when presented at the bank Possible reasons: Refer to drawer / Post-dated / Insufficient fund

Unpresented Cheques

They have not been presented to the bank for money. Stale cheques are cheques not presented for more than six months from the date of issue.

Reasons for Differences

Time differences in recording Errors occurred on the Bank account of the Cash Book and / or the Bank Statement

Bank Reconciliation Statement

Bank Reconciliation Statement

It ensures the users the difference between the balance in bank statement and the balance in cash book can be justified with reasons.

Items in Bank Reconciliation Statement

Cash Book Bank Statement Dr. Unpresented cheques Uncredited deposits Error on cash book Bank charges Standing order/direct debit Dishonoured cheques Cr. Dr. Cr.

Items in Bank Reconciliation Statement

Cash Book Bank Statement Dr. Post-dated cheques Stale cheques Credit transfer Error on bank statement Cr. Dr. Cr.

Preparation of a bank reconciliation statement

Enter ALL adjustments in the bank reconciliation statement

Update cash book as well as prepare a bank reconciliation statement