Bank Reconciliation Statements 2022/12/14

The bank Reconciliation Statement is a statement that is prepared to reconcile the Cash Book Bank
Column balance with the Bank Statement (that was received from the bank), when it disagrees.

The Bank Statement – this is a document that is sent by the bank to the business showing all the
transactions that was conducted for a given period. It will show the balance the bank account.

Credit Column- Deposits – where money is deposited into the business bank account is Credited on the
Statement

Debit Column – Withdrawal- where money is withdrawn for payments.

Balance- this will show the balance after each transaction

The Bank Statement for the month of January 2019

Date Details Cheque # Debit $ Credit $ Balance $

Withdrawal Deposit
2019 Balance b/d 3800 CR
Jan
1st
2nd Insurance 211182 800 3000
10 Sales 4900 7900
10 Rates 460 7440
15 Lee Enterprise 1280 6160
20 C K Todd 1450 7610
24 T. Wilson 700 6910
27 D. Dawn 650 7560

Receipts Cash Book (Bank Column) Payments

Date Details Bank Amt Date Details Bank Amt

2019 Balance b/d 3800 2019 2 Insurance 800
Jan
1st
10 Sales 4900 10 Rates 460
20 C K Todd 1450 15 Lee enterprise 1280
27 D Dawn 650 24 T Wilson 700
31 Balance c/d 7560
10,800 10,800
Feb 1 Balance b/d 7,560

Bank Lodgment will be on Dr side receipt unpresented cheques will be Cr side payment
The relationship between the bank and depositor

This is one of debtor and creditor

When the Depositor deposited cash with the bank, from depositor point of view- bank is considered a
debtor

From the bank point of view the depositor is a creditor

Reasons for the Discrepancies between the Cash Book and the Bank Statement Balance.

Three things are possible:

 Items are in the Cash Book and not on the Bank Statement
 Items are in the Bank Statement and not on the Cash Book
 Errors either in the cash book or the bank statement

Items in the Cash Book and not on Bank Statement

Only two items will be possible in this situation:

 Bank Lodgment/ Unrecorded Deposit- This is money received that was recorded in the cash
book but was not shown on the bank statement. ( found on the debit side of cash book)
 Unpresented Cheques – where payments were made but the cheque was not presented to the
bank for payment. (found on the credit side of the cash book)

Items that are on Bank Statement and Not on the Cash Book

Where transactions were completed by the bank on behalf of the business:

 Direct Deposits- where the bank has received money on behalf of the business and has
recorded same in the credit column of the bank statement to show an increase in the bank
balance. E.g credit transfer, dividends received, interest received, etc
 Direct Payment- where the bank makes payments on behalf of the business eg. Bank charges,
standing order, interest on overdraft, Giro deductions, credit card payments, etc.

Errors in cash Book

E.g a cheque for $234 was recorded as $243

Error on Bank Statement

Cheques received by bank deposited in an incorrect A/c

Steps in reconciling the Cash book balance with the Bank statement balance:

 Compare the Cash Book with the Bank Statement

 Update the Cash Book by putting the items that are on bank statement not in the Cash Book
 Prepare the Bank Reconciliation Statement- recording items that were in the cash and not on
bank statement
Cash Book (Bank Reconciliation Statement)

Dr Side – Bank Lodgement –

Sales 750

Cr Side – Unpresented Cheques-

P.Joseph -440

Water Charges- 220

Bank Statement (Updated Cash Book)

Direct Payment

Telecoms-230

Standing Order- 280

Bank Charges-80

Direct Deposits

Credit Transfer-480

Adjusted Cash Book A/c

$ $
Bal B/d 1170 Telecoms- 230

Credit Transfer 480 Standing Order 280

Bank Charges 80
590
Bal c/d 1060

1650 1650
Bal b/d 1060

To update cash book – using items from the bank statement

Use the opening balance

Record the direct deposit on the Dr sides

Record the direct payment on the credit side

Steps:

To Prepare Bank Reconciliation – using the items that were in Cash book but not on statement

- Add unpresented cheques since it was previously subtracted.

- Less bank lodgment- because money was previously added

Method 1 - Starting with Cash book balance

Bank Reconciliation Statement

$ $
Bal as per Adjusted Cash Book 1060
Add Unpresented Cheque
P.Joseph 440
Water Charges 220
660
1720
Less Bank Lodgement
Sales (750)
Bal as per Bank Statement 970

Method 2 Start with bank statement balance

Bank Reconciliation Statement

$ $
Bal as per Bank Statement 970
Add Bank Lodgement
Sales 750
1720
Less Unpresented Cheque
P.Joseph 440
Water Charges 220

(660)
Bal as per updated Cash Book 1060
2
 Adjusted Cash Book

$ $
Bal b/d 3183
Credit Transfer 1220 DD Regional Power 478
Bal c/d 3893 CHR 612
Standing Order 840

5113 5113
Bal b/d 3893

Bank Reconciliation Statement

$ $
Bal as per CB (3893)
Add Unpresented CheuqeWater Charges 630
Castle Furnishing 592
Lake ford 948
2170
( 1723)
Less Bank Lodgement Sales (4114)
Bal as per Bk Staement (5837)
 Bank Reconciliation Statement

$ $
Bal as per Bank Statement (5837)
+Bank Lodgement Sales 4114

(1723)
Less Unpresented CheuqeWater Charges 630
Castle Furnishing 592
Lake ford 948
(2170)
Bal as per Cash Book (3893)
4.
6, 7,8