190 likes | 898 Views
Bank Reconciliation Statement. 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. Cheques receipt
E N D
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
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 Methods of Payment and Receipt
Standing Order is the instruction given by the depositor to the bank to make regular paymentwith a fixed amount to a specific person automatically from the depositor’s bank account. Direct debit or autopay is the instruction given by the depositor to his / her creditor’s bank to collect the money with a variable amount directly from the depositor’s bank account from time to time. Payment by Bank
Cash Book Receipt / Deposit - Dr. (increase in asset) Payment / Withdrawal - Cr. (decrease in asset) Bank Statement Deposit - Cr. (increase in liability) Withdrawal - Dr. (decrease in liability) Record Transactions
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 It is a statement to highlight and explain the differences between the balance of bank statement and the balance of the bank account of the cash book of a business.
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.
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