BANK
RECONCILIATION
STATEMENTS
Point of Note
This chapter will be a combination of Accounts and Theory
Important Refresher
• We already know how to complete cash accounts and that bank
statements include items such as:
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Bank Charges
Bank Interest Charged
Standing Orders (S/0)
Direct Debit
Paypath
Credit Transfers
Dishonoured Cheques
It is important that you remember how to do a basic cash account and
understand these definitions when working in this chapter
You will be concerned with three accounts
• Your Bank A/C
• Adjusted Bank Statement
• Bank Reconciliation Statements- Here we add
lodgements not yet credited, and subtract cheques
not yet presented for payment.
Bank Reconciliation Statements
• The bank Account (or The Analysed Cash Book) is the account
holders own record of money received and spent
• The Bank Statement is the banks record of money received and
spent by the account holder. This is viewed from the banks
perspective
• The Bank Reconciliation Statement is then prepared to reconcile (or
fix) the two records and check for any errors that have occurred
Why complete a bank reconciliation
statement
• Ideally, the banks statement should match your own one, but what if a
cheque written has been delayed or the standing order has not yet been
paid or you have forgotten a direct debit? You would have obviously
made changes to your account but the bank may not have done the same
• So we have to adjust the records and make a bank reconciliation statement
which will:
1. Identify the true balance of the bank account
2. Update your own records with unknown items-those which
appear on the bank statement that you don’t know about
Comparing a Bank Statement and Personal
account
• Entries on the debit side of the bank statement are on the credit side
of the personal account and entries on the credit side of the personal
account are on the debit side of the bank account. This is because
every debit has a credit, and if I debit my own bank account, the bank
view this money as money they owe me which is a credit. (This will
make sense with practice)
• The balance on the bank statement may be different from the
balance in the personal account because there is usually a time
difference between transactions
Reasons for differences between Bank
Statements and Your Bank Account
1. Cheques written but not yet been cashed- you have given a cheque
to someone but because they have not cashed it yet it does not
show up in the banks accounts
2. Lodgements made but not yet shown in bank accounts
3. You are unaware of certain transactions, e.g. interest
4. Human error can happen-putting in €30 instead of €300
5. Direct Debits and Standing orders that you forgot about- e.g. a
particular phone bill being €125 and not the usual €40 (Máistir
Murtagh)
I know what you’re thinking……
Don’t worry- we will be doing a lot of practice
For Help
Please use the additional links to practice questions and solutions as
part of your study for this chapter that are on the website. When we
have finished this topic, use the questions we have done in class to
also help you