The document discusses bank reconciliation, which involves comparing a company's bank account records to the bank statement. Differences may arise from timing lags or errors. The reconciliation process involves updating the cash book, marking common items, and noting reconciling items to calculate the adjusted balance. Preparing the reconciliation statement highlights differences and verifies the correct bank balance.
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CTS stands for "Cheque Truncation System". It is a cheque clearing system undertaken by the Reserve Bank of India (RBI) for faster clearing of cheques.
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Documentary Credit means any arrangement that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation
http://accountsknowledgehub.blogspot.com/
CTS stands for "Cheque Truncation System". It is a cheque clearing system undertaken by the Reserve Bank of India (RBI) for faster clearing of cheques.
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Resources:
Website: https://fluiditysummit.com
Facebook: https://facebook.com/fluidityio/
Twitter: https://twitter.com/fluidityio
LinkedIn: https://linkedin.com/company/fluidityio/
YouTube: https://youtube.com/channel/UC0NBCYlgLIxjSljf7CV91nQ/
Bank reconciliation statement is a report which compares the bank balance as per company's accounting records with the balance stated in the bank statement.
It is normal for a company's bank balance as per accounting records to differ from the balance as per bank statement due to timing differences. Certain transactions are recorded by the entity that are updated in the bank's system after a certain time lag. Likewise, some transactions are accounted for in the bank's financial system before the company incorporates them into its own accounting system. Such timing differences appear as reconciling items in the Bank Reconciliation Statement.
The purpose of preparing a Bank Reconciliation Statement is to detect any discrepancies between the accounting records of the entity and the bank besides those due to normal timing differences. Such discrepancies might exist due to an error on the part of the company or the bank.
14. bank reconcilaition statement i accounting-workbooks-zaheer-swatiZaheer Swati
Bank Reconciliation Statement: The cash Book and Pass Book / Bank Statement are prepared separately. The Businessman prepares the Cash Book and the Pass Book is prepared by the Bank (here by cash book we mean two or three column cash Book). But as both the books are related to one person and same transactions are recorded in both the books so the balance of both the books should match i.e. the balance as per Pass Book should match to balance at bank as per cash book.
Here we have considered the Difference between the Bank balance as per Cash Book & the Pass book by preparation of the Bank Statement. The reasons of differences & importance of finding the variation is discussed.
The bank reconciliation is a process by which to compare an entity's book cash balance with the bank's cash balance as of a given period so as to note any discrepancies.
2. Learning Objectives
1. Explain the bank account per the business books (NL)
versus the bank statement received from the bank
2. Compare the bank account per the business books (NL)
versus the bank statement. Explain the differences?
3. Explain the functions of a bank reconciliation statement
4. Update cash book
5. Prepare a bank reconciliation statement
3. Methods of Receipts and Payments
Receipts 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 Cr
Drying your eyes Crying your eyes
Money in / good thing Money out / bad thing
Receipt / Deposit Payment / Withdrawal
Increase 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 bank
Dr Cr
Money out Money in
Withdrawal/payment Receipt / Deposit
9. Purpose of Bank reconciliation -
comparing
1. What the bank say you have V What you think you have
2. Bank statement balance V What is on your books (NL)
3. Verifying the bank balance per your books is correct (for
audit purposes)
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
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 statement
Compare bank a/c per
NL. Start updated
statement to
with b/d bank a/c
bank a/c per
at the end per NL
NL => mark
common items of the old
with and bank a/c
mark items
with not on
bank a/c (NL) Think good or
bad surprise?
16. Updating bank a/c per books – remember
Bank account per your books
(Asset)
Dr Cr
Drying your eyes Crying your eyes
Money in / Good thing Money out / bad thing
Receipt / Deposit Payment / Withdrawal
Increase in Asset Decrease in an asset
18. Bank reconciliation statement
Balance (at end) as per bank statement x
Add lodgements not yet credited by the bank +
Less cheques not yet presented for payment -
Balance (at end) of adjusted bank account (book) x
19.
20. Learning Objectives re-visited
1. Explain the bank account per the business books (NL)
versus the bank statement received from the bank
2. Compare the bank account per the business books (NL)
versus the bank statement. Explain the differences?
3. Explain the functions of a bank reconciliation statement
4. Update cash book
5. Prepare a bank reconciliation statement