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Bank reconciliation
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Bank reconciliation

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  • 1. BANK RECONCILIATION
  • 2. ObjectiveTo make the business’ bank balanceTo make the business’ bank balanceon the Cash book agree with theon the Cash book agree with theBank’s bank balanceBank’s bank balance This is accomplished in two phases: The Adjusted Cashbook The Reconciliation Statement
  • 3. The Adjusted CashbookThis is done so as to update the bank a/c in the Three Column Cashbook with the transactions (activities), which theBANK performed on your behalf, but ‘unknown’ to you [as shown on your BANK STATEMENT].
  • 4. Phase 1: How to adjust the CashbookTo the Balance c/d of the current Cash BookFirstAdd all credits made by the bank , which the business didnot know about before. Credit transfers interest receivedSecondDeduct all debits made by the bank, which the business didnot know about before. Standing orders bank charges This is the Adjusted Balance c/d
  • 5. The Reconciliation StatementThis is done so as ensurethe Cashbook agrees with the Bank Statement by reversing all the transactions (activities) the business recorded in the Cashbook, but the Bank Statement shows no evidence that those activities actually occurred.
  • 6. Phase 2: The ReconciliationTo the Adjusted Balance c/d of the Cash BookFirstAdd all those cheques, which were written by thebusiness, but were never presented to the bank to behonoured (debited) during the statement period.SecondDeduct all those deposits, which the business hadrecorded, but which never reached the bank during thestatement period so that they could be credited. This balance should be the same as the balance on the Bank Statement
  • 7. Format of the Adjusted Cashbook $ $ $ Cash book bal c/d xxx add Credit transfer c Interest received c w f less Bank charges f Standing order m Adjusted cashbook bal c/d k
  • 8. Format Reconciliation Statement     $ $ $   Adjusted Cash book bal     xxx c/d           add Unpresented cheques c           Other adjustments c           w           f less Uncredited deposits         f   Other adjustments *         m      Balance per Bank Statement       k          
  • 9. terminology ••Reconcile Reconcile -to make things agree -to make things agree ••Standingorder ––an instruction to the banker to pay aaspecific party aaspecified Standing order an instruction to the banker to pay specific party specified sum for aaspecified period on aaregular basis [monthly] sum for specified period on regular basis [monthly] ••Credittransfer ––aadeposit made to one’s account directly through the banking Credit transfer deposit made to one’s account directly through the banking system system••Bankcharges ––fee or penalties incurred upon using the banking facilities Bank charges fee or penalties incurred upon using the banking facilities ••Dishonouredcheque ––aacheque which the bank could not cash (honour) because Dishonoured cheque cheque which the bank could not cash (honour) because of aatranscription error or insufficient funds [RD] of transcription error or insufficient funds [RD] ••Unpresentedcheques ––cheques which creditors have not presented for payment Unpresented cheques cheques which creditors have not presented for payment••BankStatement ––aareport from the bank showing the dated transaction and Bank Statement report from the bank showing the dated transaction andactivities that occurred to your account over the period. It generally uses aa activities that occurred to your account over the period. It generally usescontinuous balance. continuous balance.••UncreditedDeposits ––deposits which have not been lodged/ recoreded on the Uncredited Deposits deposits which have not been lodged/ recoreded on thebank statement. bank statement.

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