BANK RECONCILIATIONS

1
BANK RECONCILIATIONS

• The Cash Book entries should periodically
  (normally monthly) be compared to the record of
  the account held by the bank, which is provided
  by a bank statement.

2
BANK RECONCILIATIONS

• Differences between the Cash Book and a bank
  statement may derive from two sources.

3
BANK RECONCILIATIONS

• Differences caused by omission to enter in the
  Cash Book an item which has passed through the
  bank account.
• Typical examples of this include
• Standing orders - A fixed amount which is paid
  each month to a specified person (business). An
  example may be the payment of rates, insurance,
  hire purchase payments on vehicles, contract hire
  payments for vehicles, etc.. The amount each
  month is fixed and established by the business
  when the standing order is established.
• Direct Debits - The business gives authority
  to a third party to collect money from the
  business, the amount is requested by the third
  party, can vary in amount and is not fixed in
  amount when the direct debit is established. An
  example may be the payment of national insurance
  by a self-employed person, as the amount varies
  depending on the number of weeks in a particular
  month.

4
BANK RECONCILIATIONS

• BACS receipts Automated payments to a business
  from a customer for goods or services supplied.
• Dishonoured Cheques The cheque written by a
  customer has been rejected by the customers
  bank.
• 2. Differences caused by the time delay between
  the recording of a transaction in the businesss
  records and the banks records.

5
PROCEDURE FOR PREPARING A RECONCILIATION STATEMENT

• Check each item in the cash book for the month
  against the corresponding item in the bank
  statement, ticking in both places and correcting
  any errors found. There will remain some
  unticked items in the bank statement.
• Items unticked in the bank statement should be
  entered in the cash book, unless there is
  evidence to suggest that the bank has made a
  mistake.

6
PROCEDURE FOR PREPARING A RECONCILIATION STATEMENT

• 3. Items which remain unticked in the cash book
  represent the items for the reconciliation
  statement. List and total both unticked payments
  and lodgements (money deposited at the bank), and
  prepare a reconciliation statement.

7
TO GUARD AGAINST FRAUD

• Different persons should prepare the bank
  reconciliation and write-up the cash book.
• The actual dates of lodgements should also be
  checked.

8
LAYOUT WITH MONEY AT THE BANK AS PER THE BANK
STATEMENT

• Balance at bank per bank statement x
• Less
• Outstanding cheques Cheq. No. x
• x
• x
• x (xxxx)
• Add
• Outstanding lodgements x
• x
• xx
• Balance as per cash book xxxx

9
LAYOUT OVERDRAWN BALANCE AS PER BANK STATEMENT

• Balance due to bank as per bank statement x
• Add
• Outstanding cheques Cheq. No. x
• x
• x
• x xxxx
• Less
• Outstanding lodgements x
• x
• xx
• Balance as per cash book xxxx