Accounts and Financial Services

The accounts office plays the very important role of keeping and managing the financial records of a
business.

Functions of the Accounts office

Preparation of payroll:

a) The payment of staff salaries, either weekly or monthly, and ensuring that all deductions for
income tax and national insurance are correct
b) Ensuring that accurate records are maintained including those for sickness and maternity
allowance
c) Ensuring that the correct payments are made to the revenue and national insurance authorities
on behalf of the organization.

Credit control and collection of accounts

a) Collecting the payments due to the company

b) Issuing accounts statement
c) Investigation of new customer’s credit rating
d) Following up overdue payments.

Credit and debit notes

a) Raising credit notes when required

b) Raising debit notes when required

Preparation of accounts for audit

a) Responsibility for the accounting records and operation of the accounting systems including
Gathering and reporting accurate financial information to management
b) Coordinating financial activities especially in relation to preparation of budgets
c) Maintenance of long-term plans for revenue and expenditure, assets and liabilities
d) Preparing regular management accounts for the board of directors
e) Preparing the annual accounts for verification by the auditors and eventual presentation to the
company’s shareholders

Managing different types of accounts

There are different types of bank accounts and most banks offer the following basic types.

- Current Accounts: This account allow account holders to purchase goods, pay for services and give
out money by writing cheques out of their cheque book
 - Savings Accounts: Earns more interest than current accoun and are intended for funds that will not
be accessed on a frequent or regular basis. It limits the number of deposits and withdrawals the
account holder is allowed to make per month. Savings account also do not come with cheques
book privileges
- Fixed Deposit Accounts: This is a high interest-bearing account for twelve- or twenty-four-months
duration. The interest will be paid at an agreed maturity date to the depositor.

Duties and responsibilities of the accounts clerk

- Preparation of payroll: This includes the calculation of wages and salaries and deductions such as
National Insurance and PAYE (Pay as You Earn)

- Preparation of cheques: This includes payments to suppliers, employees, or other service

providers. These are then presented to the accounts or personnel authorized to sign.

- Reconciling accounts: At the end of an accounting period, whether monthly, quarterly, or yearly,
there might be some disparity in accounting records. It is the responsibility of the accounts clerk to
reconcile all outstanding accounts. The bank statement must be reconciled to the accounting
records at regular intervals, usually monthly.

- Making ledgers entries: Transactions recorded in the journal must be transferred to the ledgers. It
is from the ledger that the trial is extracted and final accounts prepared

- Preparing statement of accounts: This is a statement that summaries transactions for customers
who the business sold goods to on credit. It acts as a reminder to the customer to pay any
outstanding balance.

- Writing up the cash book: All cash transactions are recorded on a day-to- day basis. At the end of
the month the cash book is balanced. This balance becomes the opening balance for the following
month.

- Preparing final accounts: This is the preparation of the trading and profit and loss account and the
balance sheet at the end of the accounting period. From the trading and profit and loss account
one would be able to determine if the business operated as a profit or loss, whether the balance
shows the financial position of the business at a particular time.

- Liaising with other departments

(a) Sales: The accounts department collects the sale revenue daily from the sales department,
authorizes credit sales and decides on the credit limit of customers.
(b) Marketing Department: Makes money available for advertising and sales promotion
 (c) Human Resources Department: The accounts department makes money available for wages
and salaries and training of employees
(d) Procurement department: The accounts department makes money available for payments of
goods when purchased.
(e) Production department: The accounts department provide the cost for goods to be produced

Attributes of the accounts clerk

The primary role of the account’s office is to record the movement of goods, services and money from
company to customer and vice versa. An accounts clerks should therefore demonstrate that he/she has

- Integrity: is honest in all aspect of the work

- Confidentiality: ability to identify which aspects of the work are confidential and not to be
divulged to any other person.
- Reliability: will carry out his/her duties in a timely manner and competently

The above attributes combined with a pleasant personality and the ability to get along with others
would be an asset to the accounts clerk.

Resources used in the account office

- Calculator: Electronic calculators are used in the accounts office for tasks which involve
calculations. They are available in pocket (battery-powered) and desktop versions with either a
visual display or a printing facility. Calculators are used for carrying out calculations e.g., for
balancing off ledgers.

- Adding machines: These are quite like electronic calculators. They are designed with printing
facilities so that users can have a hard copy or printed proof of the accuracy of calculations which
can be used for future reference and checking.

- Computers: Computers are necessary in the accounts department since they can be used for
several tasks including data entry, storage of information, making calculations and for
correspondence. They contain details of customers’ and suppliers’ accounts and are used to
prepare invoices and statements of accounts, update stock records after each transaction and
produce print-outs showing sales figures and other information required by management.

- Printers: This equipment is used to produce hard copies of statistical data.

- Scanners: Instead of having to reproduce statistical and graphical data, scanners can be used to
copy such needed data thus saving time and money.
- Copiers: This is used to produce multiple copies of the same document.

Software

Accounting packages

Most computers in the accounts office now have specialized accounting software in addition to the
usual word processing and spreadsheet software. There are many specialized accounting software
programs available which enable the accounts department staff to carry out basic bookkeeping
tasks such as writing up journals and cash books. These tasks are often written up by hand in books
but the increasing use of computers has made these jobs much easier and quicker to carry out. A
typical accounting package will carry out the following

(a) On-screen creation of and then printout of invoices

(b) Automatic updating of customers’ account in the sales ledger
(c) Recording suppliers’ invoice
(d) Automatic updating of suppliers’ accounts in the payable ledger
(e) Reconciling bank payment
(f) Making payments to suppliers and for expenses
(g) Automatic calculation of payroll and printing of pay slips

Preparation of accounts is increasingly done using specialized accounting software and saves a
great deal of time as adjustments can be made quickly without having to retype them each time a
change is made.

Spreadsheet packages

They are probably the most useful tool available to accounts personnel. This is a table set out on a
computer that replicates an accounting worksheet. It sets out a sheet of cell making up a grid of
columns and rows. Numbers, words, or formulas can be inputted into the cells. The formulas
enable calculations to take place automatically altering the numbers in some or all the rows and
columns. A widely used spreadsheet is Microsoft Excel. They can be used for a variety of purposes
including:

(a) as a calculating tool

(b) as a database
(c) for forecasting
Types of Financial Institutions

A financial institution is a business organization which collects funds from the public and places them in
financial assets, such as deposits, loans and bonds. Financial institutions include

- Central banks
The central bank performs the following functions
a) Regulate the issue, supply, and availability of money
b) Acts as banker to government and commercial banks
c) Advice government on monetary and fiscal matters
d) Manages the island’s foreign exchange reserve
e) Provides accurate and timely statistical data to government and to the public
f) Manages the public debt
g) Supervises the operation of all institutions, especially the commercial bank

- Commercial banks
A commercial bank is simply referred to as a bank. The primary operations of banks include
a) Keep money safe while also allowing withdrawals when needed
b) Issuance of cheque books so that bills can be paid
c) Provide personal loans, commercial loans, and mortgage loans
d) Issuance of credit cards and processing credit cards transactions and billings
e) Issuance of debit cards for use as a substitute for cheques
f) Allow financial transactions at branches or by using Automatic Teller Machines. (ATMs)
g) Facilitation of standing orders and direct debit, so payments for bills can be made
automatically.
h) Provide overdraft agreements for the temporary advancement of the bank’s own money to
meet monthly spending commitments of a customer in their current account
i) Provide a cheque guaranteed by the bank itself and prepaid by the customer, such as a
cashier’s cheque or certified cheque

- Offshore institutions: Banks that are registered or incorporated outside the home country. For
example, Republic bank. The head bank is in Trinidad and Tobago and one of its offshore is in
Guyana. Among the services offered by offshore banks are payments and savings account, funds
transfers, loans, currency exchange and safekeeping of assets.

- Investment company: This is a type of financial service entity, which, instead of lending money
directly to a business, helps businesses raise money from other firms in the form of bonds or
 stock(equity). Investment companies invest money on behalf of their clients who in return share in
the profit and losses.

- Bureau de change: This is also called currency exchange. This is a business where customers
exchange one currency for another. It makes a profit and competes by manipulating two variables:
the exchange rate they use to calculate transactions and an explicit commission for their services.
The rate at which a bureau will buy currency differs from that at which it will sell it. For every
currency it trades both rates will be on display, generally in the shop window.

- Cambio (foreign exchange trader): Cambios trade in most major foreign currencies. Competitive
rates are offered and an ample supply of currency is provided to its clients. Most Cambios are
operated under the following conditions:

a) You are entitled to purchase foreign currency from and sell foreign currency to any person
b) Foreign currency in any form may be purchased and sold by operators in unlimited amounts.

Procedures for making and receiving different types of payments

Most payments and receipts in business are made by cheques. However, there are other means of
making and receiving payments, including the following:

- Cash/Cheque: An easy way to pay for goods or services, or to settle a debt, is to use cash in the
form of notes and coins, or to pay by cheques. Paying by cheque is a safer option as it does not
involve carrying cash around.

- Credit cards: This is a payment facility offered by a bank. This enables the user of the card to buy
goods and to pay for them later. Every month users receive a statement showing how much they
owe the bank. Businesses may use credit cards to buy goods or make other payments to help them
manage short term cash flow problems where they are short of funds in the immediate period.

- Electronic transfer: This is the electronic exchange of money from one account to another, either
within a single financial institution or across multiple institutions, through computer-based
systems.

- Credit transfer: Money can be transferred from one bank account to another without writing out
several cheques. When the customer has several bills to pay, he fills in a slip for each payment
(showing the bank account number, amount due etc.) and signs one cheque (made out to the
bank) for the total amount. The transfer is then processed through the clearing house system
operated by the banks. (a clearing house is a place where banks electronically exchange cheques
drawn against one another)
- Money order: Money order may only be purchased from the Post Office. There are two main
classes of money order.

(a) Inland (internal or domestic): These are orders issued by individual countries for payment in
those countries. For example, inland money order issued in Guyana may only be cashed in
Guyana.
(b) Overseas (external or international): These are orders issued in a particular territory for
payment in another country or maybe orders issued overseas for payments in a specific
country.
- Telegraph money orders: This is a long-distance transmission of textual messages done from Post
Office to Post Office. Such orders are called telegraphic money orders. Example money orders
issued in Guyana for payment in Barbados or vice versa. Most orders issued in Guyana for
payment overseas are made out in the currency of the paying office whereas money orders issued
overseas for payments in Guyana are made out in Guyana currency.
To purchase a money, order a requisition for money order must be completed in ink. The following
details are required
a) The amount of money order required
b) b) the amount in the currency of the country of payment
c) the name of the office at which the money is required to be paid and the country of payment
d) the name and address of the payee
e) the name and address of the person sending the money order.

- Postal orders: This is an official piece of paper with an amount of money written on it that you can
send or give to someone who can then exchange it for the same amount of money at a post office.
It can be used as a form of payment for individuals who do not have a bank account. If an order is
stolen or lost no one other than the person’s name on it is entitled to cash the order

- Money order: is an order for a specific sum of money, usually purchased with cash at a bank or
post office, that can be used to make payment. It is used to send money to individuals who do not
have any bank account, or in payment of home choice monthly installments etc.

- Standing orders: This is instruction to the bank to pay an exact amount to another account
regularly. For example, you may set up a standing order to pay your rent. He or she completes and
signs a standing order form or wires a letter to the bank branch. The form or the letter gives details
of the payee, the payee’s account number and branch, the amount to be transferred and the date
on which payments should be made. The bank makes the credit transfers on the stated date
without further instruction. The bank may charge a fee for this service
 - Bank drafts: This is a cheque prepared by a bank on request. The bank is asked by a customer to
write a cheque on behalf of a person that will receive the cheque. The customer gives the bank the
money and the bank hands over the cheque for that amount to give to that person that is receiving
the payment (payee). For this reason, they do not bounce because of lack of funds.

- Letters of credit: This is a letter from a bank guaranteeing that a buyer’s payment to a seller will
be received on time and for the correct amount. If the buyer is unable to make a payment on the
purchase, the bank will be required to cover the full or remaining amount of the purchase. This is
usually used in international trade.

Interpretation of information on a cheque

Cheques: A cheque is a written order to a bank requesting them to pay the sum of money stated on
the cheque from an account to a person or company named. The cheque will show the name and
address of bank (drawee) as well as the name of the company or person operating the account (drawer).

The following parts of a cheque should be completed:

- The date the cheque was written

- The person or company to whom the cheque was made out (payee)
- The amount the cheque was made out for – this should be written in words and figures
- The signature of the person authorized to write the cheque.

Types of Cheques

a) Open cheque: A cheque is called an open cheque when it is payable at the counter of the
drawee bank on presentation of the cheque. An open cheque does not have any marked
specifying instruction on the way it is to be redeemed. (cashed) The holder of an open cheque
can do the following
- Receive its payment over the counter (cash it)
- Deposit the cheque in his own account
- Pass it to someone else by signing on the back of a cheque. (endorsing)

Open cheques are subject to risk of theft; hence it is dangerous to issue such cheques (unsafe way of
making a payment)
 Standard Bank PLC (drawee) Sort code
Main street 12-02-04
Kingston
Date: 1 October 2012

Pay: Allied Suppliers (payee)

The sum of: One hundred dollars only $100.00

Hortense Williams (drawer)

An open cheque

Reasons why open cheques are dishonored by the bank

- Not sufficient funds in the bank by the drawer

- Incorrect spelling of payee name
- Amount in words and figures do not match
- The cheque becomes a stale dated cheque

b) Certified cheques: A certified or manager’s cheque is one which is issued by the bank upon the
request of the customer. The customer purchases the cheque. This guarantees that the
customer has sufficient balance in the account to cover the amount. (The money is drawn
directly against the customer personal chequeing account) The bank charges the customer a fee
for this service. The person receiving the cheque is guaranteed payment upon presenting it at a
bank.

c) Post-dated cheque: This is a cheque dated ahead of the current date. A bank will not honour the
cheque if it is presented before the due date.
 d) Stale dated cheque: This is a cheque which is invalid because it was drawn a long time before
being presented for payment. A cheque is considered valid up to six months after the issue date

e) Crossed cheque: This is a cheque with two parallel lines drawn across the face with or without
the words ‘& co’ or ‘Account payee’ within the lines. The cheque may only be paid into a bank
account and may not be presented for cash. Crossing prevents fraud and wrong payment. It is a
non-negotiable method of payment. It cannot be endorsed.

Types of crossed cheques

- General crossing: Generally, cheques are crossed when

a) There are two transverse parallel lines marked across its face

b) The cheque bears an abbreviation ‘& Co. between the two parallel lines

c) The cheque bears words ‘Not negotiable’ between the two parallel lines

d) The cheque bears the words A/C. Payee’ between the two parallel lines

Generally crossed cheques can only be paid into a bank account, so that the beneficiary can be traced.

Special Crossing: When a particular bank’s name is written in between the two parallel lines, the cheque
is said to be specially crossed. In addition, the words ‘A/c Payee Only, Not Negotiable may also be
written. The effect of special crossing is that the bank makes payment only to bankers whose name is
written on the crossing. Specially crossed cheques are safer than a generally crossed cheque.

A crossed cheque can be made a bearer cheque by cancelling the crossing and writing that the crossing
is cancelled and affixing the full signature of drawer.

Documents in the accounts Office

Payroll: The payroll consists of wages and salaries, which are the monetary remuneration that an
employee earns for services rendered in accordance with his or her job specification. The term salary is
used to describe labour costs, usually monthly, for regular employment on a yearly basis. Whereas the
term wages is used to describe labour costs, usually weekly or bi-weekly, for work or serviced rendered.
An employee’s gross wage or salary may comprise of the following.

- Basic wage or salary

- Overtime payments
- Commissions
- Allowances

Basic wage or salary: This is the minimum pay for an employee’s normal time or production, according
to the contract between the employer and employee.

Overtime: This is the additional pay that an employee can earn by working extra hours. Overtime is
normally paid at a different rate than the basic wage. For overtime an employee can be paid as follows:

- Time and a half: This mean that for every overtime hour worked an employee is paid an additional
half an hour. This is usually paid for overtime during the week and Saturday.

- Double time: This means that for every overtime hour worked an employee is paid an additional
hour. This is usually paid for on Sundays and holidays.

Commissions: Sales staff and sales representatives are paid a basic salary and are also paid an
additional amount according to the quantity of goods sold. This is usually a percentage of the value of
the goods. For example, Mary Moe works for ABC Company Ltd which sells cleaning products. Ms. Moe
is paid a flat monthly salary of $800.00 plus 5% of the total value of his sales. For the month of
February Ms. Moe sold $150000 worth of cleaning products. Her gross salary will be calculated as
follows

Flat/ Basic Salary $ 800.00

Add Commission [5% of $ 150 000] $7500.00

Gross salary $8300.00

Allowances: Depending on the organization, some executives may be given allowances in addition to
their basic salary. Allowance may be for travelling, housing or entertainment

Gross wage/ salary: This is the total amount of earnings before any deductions are made.
Methods of payment of wages and salaries

Wages and salaries can be paid:

- In cash
- By cheque
- By credit transfer

Deductions

There are two types of deductions that are usually made from gross pay. These are:

Statutory deduction: which are the compulsory deductions authorized by Acts of Parliament

- PAYE (‘pay as you earn’), This is tax paid to the government, usually called income tax
- NIS (National Insurance Scheme contribution), These are contributions to health, social security
benefits and pensions, again paid to the government

Voluntary deductions: These are made at the request of the employee. These include the follows:

- Individual insurance premium- health, pension plans, life, educational

- Trade union contributions
- Credit union share

Net pay: This is the amount of earnings remining after all deductions have been made
Example 1

For example, Bobby construction employs five persons a week. Employees are required to work a 40-
hour week and are sometimes asked to work overtime.
All employees must contribute 5 percent of their gross wage to national insurance and must pay income
tax of 25 per cent of their gross wages after National Insurance has been deducted.
As payroll clerk you are required to prepare the paysheet

Employee Basic Rates $ Overtime Rates $ Overtime Hours

Worked
A Bostic 8 .00 12.00 8
C Carter 5 .50 8 .25 15
W Downes 6 .00 9. 00 10
W Gibbons 8 .00 12.00 12
G Pearce 10.00 15.00 15

BOBBY CONSTRUCTION
PAY SHEET

Employee Basic Overtime Gross National Income Total Net

wage $ wage $ Insurance tax 25% deductions wages$
(40 hours) 5% $ $
$
A Bostic
C Carter
W Downes
W
Gibbons
G Pearce
Currency memorandum

A currency memorandum is a document used to record the distribution of money for wages from the
largest to the lowest denomination of money

Example 1

As the payroll Clerk at Jennens Associates Inc. you are responsible for preparing salaries for monthly
paid employees. The computerized records for April 30, 2010 show details for payments as follows:

NAMES AMOUNTS (NET PAY)

Jalisa Lokey $ 3200.00
Jamelia Thrope $ 4050.00
Bibi Bacchus $ 3560.61
Jamal Harris $ 2550.08
Terrel Goddard $ 3315.25
Using the form below, prepare a currency memorandum for EACH employee. You must ensure that
each employee gets the maximum number of $100.00 notes

CURRENCY MEMORANDUM APRIL 30, 2012

NAME $ 100 $ 20 $ 10 $5 $1 . 25 .10 .01 TOTAL

AMOUNT
 Prepare the cash summary on the form below for Barclays Bank for the total amount to be paid to
all employees.

CASH SUMMARY

X $100 =

X $ 20 =

X $ 10 =

X $ 5 =

X $1 =

X .25 =

X .10 =

X .01 =

Paysheet: This slip shows the employee’s gross pay, allowances, income tax deductions and net pay.

INVOICES: An invoice is a document sent by the supplier to the purchaser (a customer) when goods are
purchased on credit. The term E&OE on an invoice indicate that mistakes are sometimes made in
preparing invoices. The invoice will be made by the sales department, but it is the accounts department
that takes responsibility for making sure that money is collected for invoices and for putting right,
mistakes made in sending out invoices. Credit and debit notes are a very useful way of putting these
mistakes right. They are created and administered by the account’s office.

CREDIT NOTE: This is sent out by the accounts department (supplier) to the buyer when customers are
overcharged on the invoice. Credit notes are usually printed in red to distinguish it from an invoice. The
following circumstances are reasons for a credit note to be raised.

- When goods are returned (they are the wrong good or they are faulty)
- When the invoice was wrongly calculated so that the amount shown was too high.
Debit note: This is sent out by the accounts department (supplier) to the buyer when customers are
undercharged. Debit note are usually painted in black to distinguish it from an invoice. The following
circumstances are reasons for a debit note to be raised.

- When the value of the invoice increases due to extra goods being delivered
- The goods delivered have been charged at an incorrect value resulting in the invoice to be
undervalued.
- When a charge is to be made on a customer, which increases his or her debts e.g., transport cost
paid by the seller instead by the customer interest on overdue accounts.

INVOICE 001 PO No: 175

Date: 05/05/2011
From: Belle Refrigeration Inc, Georgetown, Guyana
To: Watson Electrical Supplies, Georgetown, Guyana

QTY DESCRIPTION UNIT PRICE $ VALUE$

50 lengths Conduit 2.10 105.00
10 Male Adapters 0.20 2.00
12 Coulters 0.50 6.00
113.00
Plus, Vat 15 % 16.95
TOTAL 129.95

E&OE

INVOICE

From the items purchased, on the invoice, 2 conduct were returned on the 06 th May

CREDIT NOTE
From: Belle Refrigeration, Georgetown, Guyana
To: Watson Electrical Supplies, Georgetown, Guyana
Date: 06/05/2011 Ref No: Invoice No: 001
Date May 05th,2011

Qty Description Unit Price $ Total Amount $

4 Coulters 0.50 2.00
Plus, Vat 15% 0.3

TOTAL 2.3

CREDIT NOTE
Two additional conduct was delivered apart from the amount on the invoice, and the supplier decided
to keep them.

DEBIT NOTE
From: Belle Refrigeration, Georgetown, Guyana
To: Watson Electrical Supplies, Georgetown, Guyana
Date: 06/05/2011 Ref No: Invoice No: 001
Date: May 05th, 2011
Qty Description Unit Price $ Total Amount $
2 Conduct 2.10 4.20
Plus, VAT 15% 0.63 0.63

TOTAL 4.83

DEBIT NOTE

Receipts

Receipts are written acknowledgements of money received and evidence that the amount stated has
been paid. The receipt book can be used as a means of reference or validation for accounting purposes.

Date: June 7th, 2011 001

Received from: Richelle Adams

The sum of: Three hundred and fifty dollars $350.00

For: Dental Services

Signature: V Addison

RECEIPT
Statement of Accounts

A statement of account summarizes the transactions of all credit customers on their account during the
period and acts as a reminder to the customer to pay any outstanding balance.

Exercise 1

Benjamin & Daughters Ltd has sent the statement of account shown below to their customer Speede
Enterprise

April 1 Bal brought forward 350.00

April 8 & 15 Speede Enterprise made payments towards their account paying by cheque. The cheque
numbers were 00525 and 00530 respectively. These amounts were credited to their account

April 17 Speed Enterprise reported to Benjamin & Daughters Ltd that some of the items purchased
were defective. Benjamin & Daughters Ltd agreed to make an allowance of $25.00. This was done by
issuing a credit note for this amount, which reduced the amount to zero.

April 21 & 23 Additional supplies were ordered and invoices issued bearing the serial number A0045 and
A0075.

April 28 On this date, Speede Enterprise settles their account by making a payment of $337.50. They
took advantage of Benjamin & Daughters Ltd offer of 10 per cent discount for prompt payment within
30 days of delivery. Hence, they only needed to pay $337.50 ($375.00 -$37.50).

Prepare the statement of account

BENJAMIN & DAUGHTERS LTD
Small Ville, Christ Church, Barbados
TEL: 1 – 246 – 437 – 001

In account with: STATEMENT OF ACCOUNT

Speede Enterprise Date: 29 April 2011
Brittons Hill (Transactions and payments received after this date will
Be shown on the next account)

DATE REFERENCE DEBIT $ (Dr) CREDIT $ (Cr) BALANCE $

April 1 Balance b[f 350.00 Dr
April 8 Cheque 00525 200.00 150.00 Dr
April 15 Cheque 00530 125.00 25.00 Dr
April 17 Credit Note 0150 25.00 0.00 Dr
April 21 Invoice A0045 75.00 75.00 Dr
April 23 Invoice A0075 300.00 375.00 Dr
April 28 Cheque 337.50
April 28 Discount 37.5. 0.00 Dr
The last figure in this column is the amount due.

Statement of Account

Identification and interpretation of entries in a bank statement

Cash book: All monies paid into and withdrawn from the business’s bank account should be recorded
in the cash book. (Prepared and kept by the business)

Bank statements: This is a printed record of the balance in a bank account. It shows the amounts that
have been paid in and withdrawn from the account. Bank statements are issued periodically to the
holder of the account.

When a bank statement is received from the accounts, clerk compares it with the entries and balance
shown in the cash book. The two will not agree for various reasons. Therefore, a bank reconciliation
statement will be prepared.

Bank reconciliation statement: This is a statement drawn up to make the balance as shown in the cash
book agree with the balance as shown in the bank statement.
Reasons why the bank statement and cash book do not agree

a) Uncredited deposit/ deposit in transit/ bank lodgment: This refers to deposit made and
recorded in the cash book but not on the bank statement.

b) Unpresented cheques / Outstanding cheques: These are cheques that have been written and
credited in the cash book but not yet presented at the bank for payment.

c) Standing order: This is an instruction a bank account holder (the payer) gives to his or her bank
to pay a set amount at regular intervals to another organization or person. (the payee). The
entry will not be made in the cash book until the statement confirms that the payment has been
made

d) Bank charges: Charges made by the bank for its services; there is no fixed amount for these, so
a cash book entry cannot be made until the amount appears on the statement.

e) Credit transfer: If someone has transferred money to the company’s bank account, instead of
sending it direct to the company. Therefore, a cash book entry cannot be made until the amount
appears on the statement.

f) Direct debit: This is where a company has signed a direct debit authorizing a creditor to
withdraw a fixed amount of money from its account, this amount id debited to its account but
the entry is not made in the cash book until the statement confirms that the payment has been
made.

g) Errors: Clerical error or omissions

h) Returned/ dishonoured cheques: This is where a cheque from say, a customer, has been
deposited into the bank account and it bounces. Bank refuses to accept it) Possibly because
there are not funds in the customer’s account to cover it.
 BENJAMIN MINI -MART

CASH BOOK (Bank Column)

Date Particulars Folio Amounts $ Date Particulars Folio Amount $

1-Jan Balance b/d 8,300.00 1-jan T. Smith & 2,500
Co
8-Jan J pierre 400.00 4-Jan C. Babb 430.00
15-Jan Sales 2,000.00 16-Jan P. Simpson 225.00
28-Jan E-Johnson 200.00 21-Jan S. Ali 950.00
31-Jan K Sealy 700.00 24-Jan BS&T 140.00
31-jan Sales 1,450.00 28-Jan Bartel 325.00
31-Jan Balance c/d 8480.00

13,050.00 13050.00
1- Feb Balance b/d 8,480.00

BANK STATEMENT

DATE DETAILS DEBIT CREDIT BALANCE

$ $ $
Jan 1 Balance 8,300.00 Dr
Jan 9 Pierre (Deposit) 400.00 8,700.00
Jan 12 C Babb 430.00 8,270.00
Jan 17 P Simpson 225.00 8,045.00
Jan 18 Deposit 2,000.00 10,045.00
Jan 18 Interest 150.00 10,195.00
Jan 28 E Johnson (Deposit) 200.00 10,395.00
Jan 28 Credit Transfer 750.00 11,145.00
Jan 29 BS&T 140.00 11,005.00
Jan 29 T Smith & Co 2,500.00 8,505.00
Jan 30 LOB (Insurance) 1,100.00 7,405.00
Jan 31 Bank Charges 20.00 7,385.00
Procedures for the payment and control of petty cash using the imprest system

The imprest system: The imprest system of petty cash is money set aside for petty cash
purposes. A fixed amount of money is given to the petty cashier say once amount and he/she
records this amount in the petty cash book. A record of all monies spent is also kept in the petty
cash book. This book is balanced at the end of the month and the main cashier reimburses the
petty cashier for petty cash spent.

Imprest/float: The term imprest means a sum of money set aside to make a small cash
payment. The cash will need to be kept in a safe way. The imprest will be given by the chief
cashier to the person in the office responsible for petty cash.

Petty cash voucher: A voucher is the source document from which the petty cashier prepares
the petty cash book. Whenever any member of staff spends any petty cash, a voucher must be
completed and handed to the petty cashier as proof of the amount spent. An example of a
voucher is shown below

JR
& Co. Ltd Hincks Street, Bridgetown
_____________________________________________________________________________

Petty cash voucher no: 1 Date: 5 March 2004

Required for: Stamps
Purchase of stamps for office use $15.00

$15.00

Received by: S. Wilkinson

Authorized by: F Blackman

A petty cash voucher