Chapter 25

Bank Reconciliation Statement

Aims• To ensure that the difference between

the balance in the Bank Statement and the balance in the Cash Book is due principally to the timing difference in entering items

• To discover errors, if any, in either the banker’s record (Bank Statement) or the depositor’s record (Cash Book)

Reasons for timing differences

Reason Effect

CB to BS

BS to

CB

(a) Unpresented cheques

(b) Amount paid into the bank but not yet included in the bank statement

CB＜BS

+ -

CB＞ BS

- +

Reasons for timing differences

Reason Effect

CB to BS

BS to

CB

(c) Credit transfer

(d) Standing order e.g. regular subscription

(e) Direct debit e.g. gas

CB＜BS

+ -

CB＞ BS

- +

CB＞ BS

- +

Reasons for timing differences

Reason Effect

CB to BS

BS to

CB

(f) Bank charges / interest (charged)

(g) Returned / dishonoured cheques

CB ＞ BS

- +

CB＞ BS

- +

Reasons for timing differences

• (a) and (b) in the Cash Book but not in the Balance Statement

• (c) to (g) in the Bank Statement but not in the Cash Book

Types of questions

Prepare a Bank Reconciliation Statement without updating the Cash Book

Types of questions

Prepare a Bank Reconciliation Statement after updating the Cash Book

Types of questions

Bank overdraft