Bank reconciliation 24 oct 2012 (1)

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  • 1. Bank reconciliation Barbara Cooney
  • 2. Learning Objectives1. Explain the bank account per the business books (NL) versus the bank statement received from the bank2. Compare the bank account per the business books (NL) versus the bank statement. Explain the differences?3. Explain the functions of a bank reconciliation statement4. Update cash book5. Prepare a bank reconciliation statement
  • 3. Methods of Receipts and PaymentsReceipts PaymentsCheques receipt Cheques paymentBank interest income Bank chargesCredit transfer (C/T) Interest charges Standing order (S/O) Direct debit (D/D)
  • 4. Payments by a BankStanding Order is the  Direct debit is the instruction instruction given by the given by the depositor to the depositor to the bank to bank to pay the money with a make regular payment with a variable amount directly from fixed amount to a specific the depositor’s bank account from time to time. person automatically from the depositor’s bank  D=different account.S=Same
  • 5. Bank account per your books(Asset)Dr CrDrying your eyes Crying your eyesMoney in / good thing Money out / bad thingReceipt / Deposit Payment / WithdrawalIncrease in Asset Decrease in an asset
  • 6. Bank a/c per your books –Exercise: Dr or Cr side??? Insurance Electricity Paying a creditor (by cheque) Money from a debtor (cheque) Gas bill by DD Telephone bill by SO  Sale by cheque Receipt of capital Petty cash top-up Bank charges Lodgement into your bank a/c
  • 7. Bank statement –From the view of the bankDr CrMoney out Money inWithdrawal/payment Receipt / Deposit
  • 8. Bank statement – an example
  • 9. Purpose of Bank reconciliation - comparing1. What the bank say you have V What you think you have2. Bank statement balance V What is on your books (NL)3. Verifying the bank balance per your books is correct (for audit purposes)
  • 10. When there is a difference
  • 11. Bank reconciliationCompares / Reconciles / highlight differencesBank statement balanceVBank account per your books (NL)
  • 12. Reasons for differences
  • 13. Reasons for DifferencesTime differences in recording - Money lodged in bank but not cleared or bank statement not updated by time sent out, cheques not presented by creditorUnknown transactions – bank charges, Dishonored cheque, credit transfers, DDErrors occurred on the Bank account of your books and/or the Bank Statement e.g. entering on wrong side, incorrect amount
  • 14. Unpresented ChequesThey have not been presented to the bank for money.
  • 15. Steps to Creating bank reconciliation Compare the bank Prepare bank account per NLs to reconciliation bank statement, tick for common Update items. Use the bank Balance for items not on the bank statementCompare bank a/c per NL. Start updatedstatement to with b/d bank a/cbank a/c per at the end per NLNL => markcommon items of the oldwith and bank a/cmark itemswith not onbank a/c (NL) Think good or bad surprise?
  • 16. Updating bank a/c per books – rememberBank account per your books(Asset)Dr CrDrying your eyes Crying your eyesMoney in / Good thing Money out / bad thingReceipt / Deposit Payment / WithdrawalIncrease in Asset Decrease in an asset
  • 17. Think good orbad surprise?
  • 18. Bank reconciliation statementBalance (at end) as per bank statement xAdd lodgements not yet credited by the bank +Less cheques not yet presented for payment -Balance (at end) of adjusted bank account (book) x
  • 19. Learning Objectives re-visited1. Explain the bank account per the business books (NL) versus the bank statement received from the bank2. Compare the bank account per the business books (NL) versus the bank statement. Explain the differences?3. Explain the functions of a bank reconciliation statement4. Update cash book5. Prepare a bank reconciliation statement