9/20/2023
AAT323E
2023
Unit 5
Bank Reconciliation Statement
CHAPTER 7
 Cash controls
◦ Receipts
◦ Payments
 Bank Statement
 Reconciling items
 Reconciliation procedures
 Supplementary cash book & General
Ledger
 Bank reconciliation statement

1)
Cash controls refer to the mechanisms that the Attorney puts
into place to ensure the safety and completeness of his cash
assets (including petty cash, business bank accounts and trust
cash on hand and bank accounts)
Control over cash received:

Consists of:

Guidelines for internal control over cash receipts:

◦ Receipts from clients for services rendered OR
◦ Funds that should be kept in trust on their behalf OR
◦ Interest from investments OR
◦ Capital contributions from owners/partners
◦ 2 people present opening daily mail
◦ Cash received is recorded daily in remittance register & person should
initial
◦ Cash received allocated to Business and/or Trust receipts
◦ Cash sent to person responsible for issuing of receipt & bank deposit
slips & keeping the business and trust cash books
◦ An independent person should reconcile info on deposit slips and that
of the remittance register
The above task should as far as possible be performed by
different people within the firm for effective internal control
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2
Control over cash payments:
Consists of payments made by:
Electronic Funds transfers (EFT) and cheques payments
a)
 General business expenses paid from business bank
account, such as:
◦ Office rent, telephone, stationery
Payments on behalf of clients can be paid from business
bank account or the trust bank account (depending on if
funds were deposited into the trust fund)
 Guidelines for internal control over payments:

◦ Specific persons are appointed to authorise payments (usually
owners/partners)
◦ Payment requests should have valid documentation e.g
invoices/statements
◦ Once documentation is checked authorisation must be given as to
which bank account it should be paid out of e.g. Business or Trust
◦ Cheques must be crossed and beneficiary name as payee (no cash
cheques)
◦ All EFT payments made only to approved beneficiary that is loaded
◦ All information is sent to the person responsible for recording the
transaction in the cash books
2
Control over cash payments:
Consists of payments made by:
b) Petty cash payments
 Made in respect to small cash amounts for office expenses,
e.g
◦ Postage & stamps, refreshments, wages

Guidelines for internal control over petty cash payments:
◦ Fixed amount is determined as PC float and given to the Petty cash
cashier. This is kept in a lockable place.
◦ Recorded on pre-numbered petty cash vouchers along with
supporting documentation. These are signed and recorded in the
Petty cash book
◦ AN independent person should reconcile the cash on hand and the
petty cash vouchers on a regular basis.
◦ At the end of every month the petty cash is restored to its imprest
amount
There must be a clear distinction between payments from
BANK ACCOUNT & TRUST BANK ACCOUNT
 The bank statement:
◦ The bank (with whom an account is held, e.g.
ABSA / FNB) sends BANK STATEMENTS to clients
on a regular basis
◦ The bank statement is an account of the
attorney’s transactions WITH THE BANK for a
specific time period
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EXAMPLE BANK STATEMENT
17
NAT IONAL TR UST B ANK
P O Box 331
PRETORIA
0001
Account holder:
ABC Attorneys BUSINESS ACCOUNT
P O Box 12345
EAST LONDON
5200
Date
01/01/2019
04/01/2019
07/01/2019
07/01/2019
10/01/2019
11/01/2019
15/01/2019
18/01/2019
20/01/2019
20/01/2019
22/01/2019
24/01/2019
26/02/2019
29/01/2019
31/01/2019
31/01/2019
31/01/2019
31/01/2019
Details
Opening balance
Cheque 891
Cheque 889
Cash deposit
Cheque 894
Service fees
Cash deposit
Cheque 892
Cheque 896
Cash deposit fees
Cash deposit
Cheque 899
Direct credit
Stop order: short term insurance
Interest
Cheque 900
RD Cheque
Closing balance
Account number:
Page number:
Date:
Debit
123 456 789 0
39
31/01/2019
Credit
-750
-935
2 000
-1 215
-75
1 000
-13 000
-3 400
-120
5 400
-70
2 000
-150
75
-230
-300
Balance
10 000
9 250
8 315
10 315
9 100
9 025
10 025
-2 975
-6 375
-6 495
-1 095
-1 165
835
685
760
530
230
230
A bank statement commences with the opening balance of the bank
account at the beginning of the month.
A favourable bank balance is reflected as a CREDIT balance on the
bank statement (IE OPPOSITE TO YOUR OWN PRACTICE BOOKS)
An overdrawn/ unfavourable balance, (i.e. you have gone into
overdraft) is reflected as a DEBIT (negative) balance on the bank
statement.
The transactions are presented in CHRONOLOGICAL (DATE) order
and the bank statement balance is determined after each
transaction.






Payments and other expenses are DEBITED on the bank statement,
whilst payments are CREDITED in the cash book / general ledger
of the attorney’s practice
Deposits and other receipts are CREDITED on the bank statement,
whilst receipts are DEBITED in the cash book / general ledger of
the attorney’s practice
THE BANK STATEMENT COMES FROM THE BANK – IT DOES NOT COME
FROM THE ATTORNEY,
IT IS AN OUTSIDE DOCUMENT THAT WE USE TO COMPARE TO THE
ATTORNEY’S OWN RECORDS THAT HE KEEPS HIMSELF
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


PURPOSE of a reconciliation is to get the :
◦ Cash Book Balance to agree with the Bank Balance
◦ At a specific point in time
HOWEVER these balances will differ due to “Timing differences”
These DIFFERENCES are identified and called RECONCILING
ITEMS
1)
Most common reconciling items are:
Items recorded in the cash book / general ledger,
BUT NOT YET RECORDED ON THE BANK STATEMENT
EXAMPLES:
a)
b)
outstanding deposits (attorney has receipted the
money but has not yet deposited into the bank
account, or is still waiting to clear at the bank)
outstanding payments (attorney has written out a
cheque but the beneficiary of that cheque has not yet
taken it to the bank to deposit into his own account or
cash the cheque yet. If he does not do this within 6
months, the cheque will become STALE
2)
Items recorded on the bank Statement,
BUT NOT YET RECORDED IN THE CASH BOOK/GENERAL LEDGER
EXAMPLES:
a)
bank charges
◦ the bank’s own fees charged directly to the attorney’s bank account &
seen on the bank statement
◦ Includes expenses for
b)
 cheque books,
 cash deposit fees,
 service fees
unpaid / refer to drawer cheques (refused, dishonoured or RD
cheques)
◦ a cheque that the attorney previously receipted from a client and
banked into his bank account has been declined by that person’s bank,
due to




insufficient funds
Cheque not signed
Incorrect date e.g. wrong year
Amount in words differs from numbers
◦ the attorney’s bank will then reverse that amount from the deposits
that it previously credited to the attorney’s bank account (eg like a
reversal of a deposit)
EXAMPLES CONT
c) Stop orders (or debit orders)
◦ Attorney’s practice signs a stop order (or debit order) to instruct
the bank to make payments directly out of his account to another
party on a specific date
◦ he does not have to effect payment himself – it is a standing
instruction
d) Direct deposits
◦ Made when another person deposits money directly into the
attorney’s bank account or does an electronic funds transfer
e) Interest
◦ Earned on a favourable balance or payable on an overdraft by or
to the bank – it is a bank-generated transaction
f) Errors
◦ Either in the attorney’s own books or made by the bank on the
bank statement
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Comparison of the items in the cash book of the attorney to the
items on the current bank statement & previous bank
reconciliation statement on a transaction for transaction basis

The corresponding items are ticked off (√)
Not a difficult process:


1)
Tick off the items that are the same
2)
Identify the items that are different
3) Start with one’s balance and add/subtract the different items until you
get to the balance of the other
STEP 1: The following items are TICKED OFF against each
other:
◦ Outstanding cheques and deposits and/or errors from last
month’s bank reconciliation against the current month’s bank
statement
◦ All cheques debited to the bank statement against the
payment entries in the cash book/Bank general ledger account
◦ All deposits credited to the bank statement against the
receipts entries in the cash book/Bank general ledger account
Handout 18
1. The Cash Book for December 2013
CASH BOOK OF FRANC ATTORNEYS - DECEMBER 2013
DATE
RECEIPTS
SUNDRY
1-Dec doc Balance
BANK
135 630
DATE doc PAYMENTS
135 630
√ 6 500
12 400 √ 12 400
3 320 √ 3 320
4 33 Fee Income
17 200
5 275 Loan
10 000
14 276 Stationery
5 000
22 277 Water and electricity
6 000
6 500
16 34 Debtor: L Lion
21 35 Fee Income
30 36 Fee Income
30 000
30 000
187 150
187 150
137 150
137 150
SUNDRY
1-Dec 274 Rent Paid
30 278 Equipment
Balance
b/d
√17 200
√10 000
c/d
5 000
√ 6 000
12 500
Balance
1-Jan
BANK
12 500
137 150
137 150
187 150
187 150
2. The Bank Statement of the Business for December 2013.
Date
Details
1
Balance
2
Cheque 274
5
Deposit
7
Cheque 275
17
Deposit
22
Deposit
28
30
Debit (-)
Credit (+)
17 200
√
10 000
√
Cheque 277
6 000
Bank Charges
250
√
Balance
135 830
√
125 130
√ 12 400
√ 3 320
127 530
Interest on credit bal.
31
118 630
6 500
115 130
130 850
124 850
124 600
1 500
126 100
R/D cheque 250
4 100
122 000
Stop order
2 000
120 000
STEP 2: Items that should be recorded in the
bank
reconciliation statement
i.e. Those that are not ticked off in the Cash
Book/Bank general ledger
◦ Items from last month’s bank reconciliation
statement that are still not ticked off
◦ Deposits recorded in the Cash book/Bank general
ledger that do not appear on the bank statement
◦ Payments recorded in the Cash book/Bank general
ledger that do not appear on the bank statement
◦ Errors made on the bank statement (i.e. The
attorney’s records are correct, the bank needs to
made the correction
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1. The Cash Book for December 2013
CASH BOOK OF FRANC ATTORNEYS - DECEMBER 2013
DATE
RECEIPTS
SUNDRY
1-Dec doc Balance
BANK
135 630
DATE doc PAYMENTS
135 630
17 200
5 275 Loan
10 000
14 276 Stationery
5 000
22 277 Water and electricity
6 000
√ 6 500
12 400 √ 12 400
3 320 √ 3 320
4 33 Fee Income
6 500
16 34 Debtor: L Lion
21 35 Fee Income
30 36 Fee Income
30 000
SUNDRY
1-Dec 274 Rent Paid
30 000
30 278 Equipment
12 500
Balance
1-Jan
Balance
b/d
187 150
187 150
137 150
137 150
c/d
BANK
√17 200
√10 000
5 000
√ 6 000
12 500
137 150
137 150
187 150
187 150
2. The Bank Statement of the Business for December 2013.
Date
Details
Debit (-)
1
Balance
2
Cheque 274
5
Deposit
7
Cheque 275
17
Deposit
22
Deposit
28
Cheque 277
6 000
30
Bank Charges
250
17 200
10 000
Credit (+)
Balance
135 830
√
√
√
√
125 130
√ 12 400
√ 3 320
127 530
115 130
130 850
124 850
124 600
Interest on credit bal.
31
118 630
6 500
1 500
126 100
R/D cheque 250
4 100
122 000
Stop order
2 000
120 000
STEP 3: Items that should be adjusted in the
attorney’s
Cash Book/Bank GL
I.E (those items not yet ticked off on the bank
statement)
◦ The deposits and receipts appearing on the BS not yet in
the Cash Book
 direct deposits,
 electronic transfers)
◦ The payments and expenses appearing on the BS not yet
in the Cash Book
 stop orders & debit orders,
 R/D cheques,
 bank charges & Interest
◦ Errors made in the cash book or general ledger,
 i.e. where there is an error in the attorney’s accounting records
that needs to be adjusted (not an error on the bank’s side)
1. The Cash Book for December 2013
CASH BOOK OF FRANC ATTORNEYS - DECEMBER 2013
DATE
RECEIPTS
SUNDRY
1-Dec doc Balance
BANK
135 630
DATE doc PAYMENTS
135 630
17 200
5 275 Loan
10 000
14 276 Stationery
5 000
22 277 Water and electricity
6 000
√ 6 500
12 400 √ 12 400
3 320 √ 3 320
4 33 Fee Income
6 500
16 34 Debtor: L Lion
21 35 Fee Income
30 36 Fee Income
30 000
SUNDRY
1-Dec 274 Rent Paid
30 000
30 278 Equipment
12 500
Balance
1-Jan
Balance
b/d
187 150
187 150
137 150
137 150
c/d
BANK
√17 200
√10 000
5 000
√ 6 000
12 500
137 150
137 150
187 150
187 150
2. The Bank Statement of the Business for December 2013.
Date
Details
1
Balance
2
Cheque 274
5
Deposit
Debit (-)
17 200
7
Cheque 275
17
Deposit
22
Deposit
10 000
28
Cheque 277
6 000
30
Bank Charges
250
Interest on credit bal.
31
Credit (+)
√
√
√
Balance
135 830
√
118 630
6 500
√ 12 400
√ 3 320
125 130
115 130
127 530
130 850
124 850
124 600
1 500
126 100
R/D cheque 250
4 100
122 000
Stop order
2 000
120 000
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Is an extension of the cash book & is prepared as follows:
 Start with the current month’s cash book balance
 Take the reconciling items
◦
amount in the Bank Statement that is NOT in the CB
 Determine the adjusted balance of the cash book
 This balance should agree with the balance determined in the bank
reconciliation
Supplementary Business Cash Book for December 2018
date Receipt
fol
Bank
31 Balance
b/d
b/
Interest on Cr balance
s
Correction of error
(undercast)
date Payments
fol
137150
30
Bank charges
1500
31
Debtor (R/D no.250)
200
Bank
b/
s
b/
s
b/
s
Insurance
Balance
250
4100
2000
c/d
132500
138850
1-Jan Balance
b/d
138850
132500
18
SOLUTION for a Bank General Ledger
BANK
31-Dec Balance
Interest on Cr bal
Correction of error
b/d
137 150
b/
s
1 500
200
31-Dec Debtor (R/D cheque
No. 250)
Bank charges
Insurance
Balance
138 850
01-Jan Balance
b/d
b/
s
b/
s
b/
s
c/d
4 100
250
2 000
132 500
138 850
132 500
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The use of a bank reconciliation statement is necessary as the
attorney’s practice cannot record the adjustments or
corrections directly on the bank statement
 Serves as a “supplement” to the bank statement or a
“continuation” of the bank statement that reflects the items
that were included in the cash book and NOT in the Bank
Statement
 The bank reconciliation will add/subtract to the balance per
the bank statement so that it agrees to the balance per the
cash book & Bank in the General Ledger
 Example of Bank Reconciliation:

Credit Balance per Bank Statement
Less: Outstanding cheques
Add: Outstanding deposits
Add/less: Bank errors
Debit Balance per general ledger
R XXX
(R XXX)
R XXX
R XXX
R XXX
1. The Cash Book for December 2013
CASH BOOK OF FRANC ATTORNEYS - DECEMBER 2013
DATE
RECEIPTS
SUNDRY
1-Dec doc Balance
BANK
DATE doc PAYMENTS
SUNDRY
BANK
135 630
135 630
1-Dec 274 Rent Paid
17 200
17 200
4 33 Fee Income
6 500
6 500
5 275 Loan
10 000
10 000
16 34 Debtor: L Lion
12 400
12 400
14 276 Stationery
5 000
5 000
21 35 Fee Income
3 320
3 320
22 277 Water and electricity
6 000
6 000
30 36 Fee Income
30 000
30 000
30 278 Equipment
12 500
12 500
187 150
187 150
137 150
137 150
Balance
1-Jan
Balance
b/d
c/d
137 150
137 150
187 150
187 150
Bank Reconciliation Statement of Franc Attorneys on 31 December 2018
Favourable balance as per bank statement
120000
Less: outstanding cheques (OR cheque not yet presented for payment)
-17500
No.276
5000
No. 278
12500
Add: outstanding deposit
Balance as per Bank Account in General ledger
30000
132500
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