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Bank Reconciliation
ACCN 1 - Accounting
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Starter for 10…..

Write 3 questions regarding anything topics we have studied so far this
year….

Write the answers for the questions……..

(try to think of questions that challenge your deeper knowledge and not
just one word answers – Use Bloom’s Question Stems to help you)

Next Activity will be to quiz someone to see who can stay in the HOT
SEAT… If they answer your questions correctly, they stay in the middle.
If they are incorrect, you swap places… The WINNER is the person who
remains in the middle at the end of the quiz.
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TODAY’S WINNER – Oshane
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Can you write 3 questions for next Tuesday to try and become the
HotSeat reigning champion?
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Learning Objective:
 To
verify the accuracy of the double-entry through
the preparation of the bank reconciliation
statement.
E
grade – reconcile the cash book with the bank
statement
C
grade – To create a Bank Reconciliation
statement
A
grade - explain why bank reconciliations are
prepared
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Completing entries in the Cash
Book

A Business will record funds paid into & out of the bank in to
the Cash Book

The Bank will also record funds paid into & out of the
business bank account and issue a Bank Statement

The balances should be the same
 What
might cause the two balances to be
different? In pairs, make a list.
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Possible answers…

Time delay between receiving cheque and paying in to the
bank

Time delay between paying into bank and it being ‘cleared’

Bank interest & charges paid (shown on statement)

Standing order not shown in Cash book until actually paid

Direct Debits not shown in Cash book until actually paid

Customers pay accounts direct to bank
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Cash Book v Banks Statement
So what are the differences? What does this say you should sensibly do when
balancing-off the Cash Book at the end of the accounting period?
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Key Terms

Unpresented Cheques – Cheques that have been drawn
(written), entered in the cash book BUT have not yet been
presented to the bank

Outstanding (uncleared) lodgements – bank deposits that
have been recorded in the cash book but haven’t yet been
processed by the bank

Direct Debit – authority granted by a business to allow a 3rd
party to request payments directly from the bank account.

Standing Order – Fixed/Regular interval payment
automatically paid on the instruction of the BUSINESS
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Preparing the Bank Reconciliation
Statement
1.
Tick all items that appear on the bank statement AND the Cash Book
2.
Enter in to Cash Book any items missing that are on the bank
statement
3.
Balance the cash book (bank columns) & c/d closing balance
4.
Start Bank Reconciliation Statement with the closing ‘balance as per
the cash book’
5.
Unticked payments (CR) in the cash book - unpresented cheques
6.
Unticked receipts (DR) in the cash book – outstanding lodgements
7.
Calculate the closing balance on the bank reconciliation statement
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Bank Statement
What is different
about this
statement when
you compare it to
the CASH BOOK?
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Exam Questions……

In the text book it shows how to update the cash book by
adding the missing entries BEFORE you balance off
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In the exam………?
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
What if they DON’T give you the cash book but just tell you what
the Balance b/d is?
How would you process this?
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Creating a Bank Reconciliation
Statement
Bank Reconciliation Statements as at (Date)
£
Balance as per cash book
xxx
ADD Unpresented Cheques
xxx
xxx
LESS Bank lodgement not on statement (xxx)
Balance as per Bank Statement
xxx
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Using a Bank Overdraft

If the closing balance of the Cash Book shows an ‘Overdraft’ how
does this effect the way that the Bank Reconciliation Statement is
drawn up?

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DEDUCT the unpresented cheques
ADD outstanding lodgements
WHY??
 In order to show the correct amount in the bank account. If you had
£200 overdraft and you added £100 of unpresented cheques you
would have £300 as the overdraft total. IN REALITY – unpresented
cheques means you have more money than you thought and
therefore the overdraft is REDUCED.
 £200 - £100 unpresented cheques = £100 overdraft
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Importance of the Bank
Reconciliation Statement
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Allows for identification of errors in cash book – own errors
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Allows for identification of processing errors by bank
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Account for missing entries
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Identify FRAUD or act as deterrent
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Out of date Cheques can be cancelled (over 6 months)