GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
BANK RECONCILIATION STATEMENT
Learner Note: Treat all the entries one by one so that you understand them
LESSON OVERVIEW
Introduce session – 5 minutes
Typical exam questions – 20 minutes
Review/solutions 35 minutes
1.
2.
3.
SECTION A: TYPICAL EXAM QUESTIONS
Question 1: 30 MARKS
20MINUTES
Copy and complete the following table. The first question has been done for you.
No.
1.
Balance as per
Post-dated cheques
Bank
Account at end of issued to creditors
the month
for subsequent
months
R640 (Dr)
R 300
Post-dated
cheques
received from
debtors
Balance as per
Bank
Statement at end of
the month
R 420
R940 (Cr)
2.
560 (Dr)
Nil
160
?
3.
?
690
195
450 (Dr)
4.
1 200 (Cr)
?
310
850 (Dr)
5.
?
450
404
220 (Cr)
6.
100 (Cr)
550
560
?
7.
650 (Cr)
?
680
150 (Dr)
8.
?
1 130
850
240 (Dr)
9.
325 (Cr)
610
315
?
10.
410 (Cr)
?
165
125 (Dr)
HINTS
Leave out post-dated cheques received
Page 1 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
SECTION B: SOLUTIONS AND HINTS
HINTS
REMEMBER THE RELATIONSHIP BETWEEN A BANK AND ITS CLIENT.
A DEBIT IN THE BANK ACCOUNT MEANS A CREDIT IN THE BOOKS OF THE
BANK
REMEMBER WHAT IS DONE TO POST DATED CHEQUES ISSUED AND
RECEIVED
HINT
Explanation of solution No. 1 and 3
1. Solution no. 1:
R940 (Cr) – R300 (Dr) = R640 (Dr) [Leave out post-dated cheques received]
2. Solution no.3:
R450 (Dr) + R690 (Dr) = R1 140 (Cr) [Leave out post-dated cheques received]
Post-dated cheques
Balance as per Bank issued to creditors
Account at end of
for subsequent
No.
the month
months
Post-dated
cheques
Received from
debtors
R 300
R 420
Balance as per Bank
Statement at end of
the month
1.
R640 Dr
R940 Cr
2.
560 Dr
Nil
160
3.
1 140 Cr
690
195
450 Dr
4.
1 200 Cr
350
310
850 Dr
5.
230 Cr
450
404
220 Cr
6.
100 Cr
550
560
450 Cr
7.
650 Cr
500
680
150 Dr
8.
1370 Cr
1 130
850
240 Dr
9.
325 Cr
610
315
285 Cr
10.
410 Cr
285
165
125 Dr

560 Cr
Learner Note: Bank reconciliation is an integral part of internal control
Page 2 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
SECTION D: ADDITIONAL CONTENT NOTES
Post-dated cheques issued
A post-dated cheque is a cheque which is dated for the future. It cannot be presented to the
bank for payment or be deposited into a banking account until the date specified on the
cheque. A cheque can for example, be written out on 1 July 2010 but dated 1 August 2010.
This means that the cheque is post-dated to 1 August 2010. It becomes valid on that date
and only then can it be presented to the bank for payment.
A major advantage of post-dated cheques is that the creditor is assured of payment on a fixed
date in the future. No reminders need be sent to the debtors and the creditor enjoys the
satisfaction of knowing that he has a written undertaking of payment through a bank.
Post-dated cheques have replaced bills of exchange and promissory notes to a large extent in
the settlement of debts between parties. A business can receive post-dated cheques from its
debtors. To budget and simplify its payments, a business can also issue post-dated cheques
to its creditors.
Post-dated cheques received from debtors
When a post-dated cheque is received from a debtor, no receipt is made out; in other words
a post-dated cheque received is not receipted. The receipt will only be written out on the date
when the cheque becomes valid (due). In the above example a receipt will only be written out
on 1 August. A post-dated cheque will not be recorded in the books of account before it
becomes valid. On that day the cheque will be receipted and thereafter recorded into the CRJ.
All post-dated cheques must be kept in a safe place until they become due. No bank will
accept a post-dated cheque before it becomes valid. The business will enter these post-dated
cheques in a register for post-dated cheques. On the due date these cheques will be handled
in the normal way; a receipt will be issued, it will be entered into the bank deposit book and
will be deposited into the banking account.
A post-dated cheque received will therefore not affect the bank account or reconciliation
procedures as it is recorded in the CRJ on the due date.
NO ENTRY IS MADE IN THE CRJ.
Post-dated cheques issued to creditors
All cheques issued are recorded in cheque number sequence and not in date order. Therefore
when a post-dated cheque is issued, it is recorded immediately in the CPJ even though the
cheque is dated 2 months hence. The reason for recording all cheques in numerical sequence
is to maintain absolute control over their issue and to account for immediate verification of
each cheque issue, otherwise the sequence of cheque numbers will be lost.
When a post-dated cheque is issued it will not reach our bank until the due date. It will
therefore not be reflected on the bank statement for the current month. Such a cheque must
be treated as an outstanding cheque in the Bank Reconciliation Statement until it is presented
to the bank for payment.
Page 3 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
Treatment of post-dated cheques at the end of the financial year
All post-dated cheques must be shown in the Balance Sheet as creditors. The reason for this
is that post-dated cheques do not really settle the accounts of creditors. These amounts are in
actual fact still owing to the creditors and the debt will only be cancelled when the cheques fall
due and are paid out by the bank. At the end the financial year when drawing up the balance
sheet the post-dated cheque amounts will be added to the bank balance if favourable (or
deducted from the bank overdraft) and creditors increased accordingly.
BANK RECONCILIATION STATEMENT OF THE PREVIOUS MONTH
Sometimes cheques issued by a firm remain outstanding for periods longer than one month.
The payee may have temporarily mislaid the cheque or the cheque could have gone astray in
transit. These cheques are reflected as outstanding in the first month of the reconciliation.
However, they can also remain outstanding in subsequent month and will therefore affect the
process of bank reconciliation.
For this reason when we compare the current month’s bank statement with the current
month’s cash journals to determine outstanding cheques not yet presented to the bank for
payment, we must, in addition, check the current month’s Bank Statement with the previous
month’s bank reconciliation statement to determine which cheques are still outstanding from
the previous months. These cheques must again be listed as outstanding when preparing the
current month’s reconciliation statement.
It should be remembered that all cheques are normally valid for a period of six months after
which they are regarded as stale. The bank will not pay out a stale cheque. The payee usually
returns the stale cheque to the drawer who then cancels the cheque and issues a fresh
cheque. Stale cheques are dealt with further on in this module.
OUTSTANDING SALARY CHEQUES NOT YET PRESENTED TO THE BANK FOR
PAYMENT
Firms that have a large number of employees usually record their salary cheques in the
Salaries Journal. Only the total amount paid for salaries is indicated in the Cash Payments
Journal.
Many employees who receive their salary cheques on the last working day of the month
normally cash their cheques or deposit these into their savings/current account during the first
few days of the new month.
The Bank Reconciliation Statement of the firm at the end of the month will therefore include
uncashed salary cheques as part of outstanding cheques in the normal way. All outstanding
cheques should therefore be ascertained by comparing the monthly bank statement with the
Cash Payments Journal as well as the Salaries Journal. It should be noted that the rapid
progress made in electronic banking, the need to issue salary cheques will fall away. Salaries
will then be transferred electronically from the business’s bank account to the individual
transmission/savings/current account of each employee.
3. Note: SALARY CHEQUES NOT YET CASHED MUST BE SHOWN IN THE BANK
RECONCILIATION AS OUTSTANDING CHEQUES i.e. DEBIT
OUTSTANDING CHEQUES.
Page 4 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
CHEQUES STOPPED FOR PAYMENT AT THE BANK
Reasons for stopping payment on cheques
A cheque is an instruction to the bank to pay a party a specified sum of money.
Sometimes it becomes necessary to instruct the bank not to pay out a particular
cheque. This procedure is called a “stop payment”. A stop payment form (see below) is
completed by the drawer and handed to the bank whenever he wishes to stop payment on a
cheque. Possible reasons for stopping payment on cheques by businessmen are:
 The cheque may be lost or stolen-the payee is then unable to cash or bank the
cheque. The drawer must then place a stop payment immediately as someone else
may cash the cheque.
 The drawer may have been dissatisfied with the work performed or with the quality of
the goods delivered.
 Merchandise ordered may not have been timeously delivered.
 The cheque may have been acquired illegally or dishonestly.
 The debt may already have been settled, e.g. merchandise returned to the creditor
after the cheque was posted.
Accounting entries for cheques stopped for payment
When a cheque is issued it is recorded in the Cash Payments Journal. When payment of the
cheque is stopped, this entry must be cancelled.
The majority of the transactions recorded in the Cash Payments Journal are posted to the
Ledgers on a daily basis. Therefore when a cheque is stopped for payment the entry cannot
simply be struck off in the CPJ.
The original entry has to be reversed. The Bank Account had originally been credited with
total payments for the month. The reversal transaction therefore has to be recorded in the
Cash Receipts Journal. When posted to the Ledger this entry ensures that the Bank Account
is debited and the relevant creditors (or expense) account credited to cancel the original
entry.
If a fresh cheque is issued, it will be recorded in the CPJ in the normal way.
ERRORS IN THE CASH JOURNALS
Errors in the Cash Receipts Journal
The only type of error involving the CRJ is the receipt and depositing of money. If for example
a debtor or tenant pays R466 but only R66 is recorded in the CRJ, then the error can be
discovered in one of the following ways within a very short time:
 The cashier will count the cash received for the day and find that he has an extra
R400 in his possession.
 Since the amount received is always deposited as a total, i.e. R466, as a control
measure, the teller at the bank will find that the deposit is overcast by R400.
Since errors involving the receipt and depositing of money can be discovered on the same
day, the error can be rectified immediately as the transaction has not been posted from the
CRJ to the Ledger. The incorrect figure is deleted neatly in the CRJ and the correct amount
inserted.
Such types of errors rarely occur because in business practice great care is exercised over
the control of cash received.
NO ENTRY IS MADE IN THE CRJ
Page 5 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
Errors in the Cash Payments Journal
Errors can occur when writing out cheques. These will only be discovered when
payments are checked against paid cheques returned by the bank together with the
monthly bank statement.
If a cheque is made out for R109 but recorded in the CPJ as R9, the error cannot be
corrected by deletion as the transaction has already been posted to the Ledger.
Since the majority of entries are posted from the CPJ to the ledgers on a daily basis,
an entry in one of the cash journals will be required to correct errors in the CPJ.
The correction can be dealt with in one of 2 ways:
 Where the amount is recorded in the CPJ at a lower figure (undercast) but the
value of the cheque is higher, then another entry is required in the CPJ. This entry
will show the difference between the amount originally recorded in the CPJ and the
correct value of the cheque issued.
 When posted to the ledger the bank account will be credited and the relevant
contra account e.g., creditors (or expense) account debited to arrive at the correct
entry.
 Where the amount recorded in the CPJ is higher (overcast) than the value of the
cheque issued, then another entry is recorded in the CRJ. This entry will show the
difference between the amount originally recorded in the CPJ and the correct value
of the cheque issued.
 When posted to the ledger, the bank account will be debited and the relevant
contra account e.g. creditors (or expense) account credited to arrive at the correct
entry.
ERRORS IN THE BANK STATEMENT
It is possible for the banks to make mistakes. The general rule to follow is to correct the errors
where it was made. If the bank makes the error it must be corrected by the bank.
For reconciliation purposes the correction will be shown in the Bank Reconciliation Statement
as error corrected.
e.g.
If the business account was wrongly debited by the bank, then in the Bank
Reconciliation Statement it will appear as follows:
Debit
Credit
Credit error made by Bank
(Account wrongly debited)
xxx
and
If the business account was wrongly credited by the bank, then in the Bank
Reconciliation Statement it will appear as follows:
Debit
Debit error made by Bank
(Account wrongly credited)
Credit
xxx
DISHONOURED CHEQUES
Cheques received from tenants, debtors and customers are deposited to the credit of the
business banking account and presented for payment at the drawer’s bank. Some times,
these cheques are not honoured by the drawer’s bank,i.e. payment on these cheques is
refused because of various reasons. Such cheques are regarded as dishonoured cheques.
Page 6 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
Some reasons why cheques dishonoured:








Insufficient funds in the drawer’s account.
The cheque has been damaged.
The amount in words and the amount in figures differ.
The cheque has not been correctly prepared.
The signature of the drawer is queried or omitted.
The drawer has stopped the cheque.
The words or figures are illegible.
The full signature of the drawer does not verify alterations on cheque.
The dishonoured cheque appears as a debit entry on the bank statement usually prefixed by
the abbreviation UN. This debit cannot be ticked off against a corresponding credit in the Cash
Payments Journal.
In the case of a cheque dishonoured the credit entry is made through the Cash Payments
Journal. The effect of this is to debit a debtor for the amount that has not been paid
The cheque is sent back to the drawer for replacement. .
Stale cheques
When a cheque is older than six months, the bank will refuse payment. Such a cheque has
become stale. The cheque that has not yet been presented to the bank for payment must
appear on the bank reconciliation statement every month, until it becomes stale. When it
becomes stale, the cheque must be cancelled in the Cash Receipts Journal. Cheques from
certain concerns become stale after three months.
If a replacement cheque is issued then the normal entry is made in the Cash Payments
Journal.
Reversal (Cancellation)
A reversal (cancellation) of the original entry takes place in the following two categories in the
CPJ of dishonoured cheques:
 Where the cheque was dishonoured because the drawer did not have sufficient funds to
meet the cheque in his bank account.
 Where there is good reason to believe that the debtor or customer has no intention of
meeting his debt, irrespective of the reason for dishonouring of the cheque. When a
cheque is received from a debtor it is recorded in the CRJ and thereafter banked as a part
of receipts. The Bank Account is debited and the Debtor’s Account is credited.
When a debtor’s cheque has to be cancelled, the original accounting procedure has to be
reversed, viz.
1. The unpaid cheque has to be shown in the CPJ and reflected in the “Debtors control”
column.
(Unpaid cheques appear as a debit on the Bank Statement.)
2. The Debtor’s account is debited (re-opens) and the Bank Account is credited.
3. When a debtor’s cheque is dishonoured owing to insufficient funds, any discount
previously allowed should be cancelled by means of a Journal entry. The Debtor’s account is
debited and the Discount allowed account is credited.
The effect of the above entries is that the debtor once again owes the amount of the unpaid
cheque.
It is also important to remember that cheques dishonoured because of insufficient funds will
involve a significant waiting period before the debt is settled. The amount of the cheque
reversed should be clearly indicated on the monthly statement sent to the drawer (debtor) to
Page 7 of 10
GAUTENG DEPARTMENT OF EDUCATION SENIOR SECONDARY INTERVENTION PROGRAMME
ACCOUNTING
Grade 11
Session 9
LEARNER NOTES
ensure that he is fully aware of the unpaid cheque and the need to make proper arrangements
to settle the debt. e.g. A. Smith’s cheque returned by the bank marked R/D, R400.
CASH PAYMENTS JOURNAL
Doc.
No. Date Details
Bank
B/S
A. Smith (R/D cheque)
400
Debtors
Control
400
SECTION D: HOMEWORK
The following information was taken from UnitedTraders, a sole trader.
REQUIRED:
Make use of the information provided below to calculate the following as at 30
November 2010.
1.
Balance as per bank account.
2.
Value of cheques not yet presented for payment.
3.
Balance as per bank statement.
4.
Prepare a Bank Reconciliation Statement as at 30 November 2010.
INFORMATION:
The following details were extracted from the accounting records of United Traders.
(a)
W.Rooney deposited R10 000 in a current account in the name of United
Traders At Trafford Bank on 20 August 2010.
(b)
United Traders started formal trading on 1 October 2010
(c)
An examination of the cash journals and the bank statements received from
Trafford Bank for October and November 2010 revealed the following:
(i)
(ii)
Cheques recorded in the CPJ in October 2010
Recorded on bank statement in October
Recorded on bank statement in November
Still not recorded on a bank statement
R23 000
17 000
4 000
2 000
Cheques recorded in the CPJ in November 2010
Recorded on bank statement in November
Still not recorded on a bank statement
R38 600
(iii)
Deposits recorded in the CRJ in October 2010
Recorded on bank statement in October
Recorded on bank statement in November
R19 200
17 800
1 400
(iv)
Deposits recorded in the CRJ in November 2010
Recorded on bank statement in November
Still not recorded on a bank statement
R37 100
(v)
Deposits made by tenant at Trafford Bank and not
Recorded in cash journals of United Traders
As per November bank statement
31 300
7 300
33 700
3 400
R 1 300
1 300
Learner Note: When you attempt the homework, you need to ensure that you are able
to answer the questions in the allocated time frames.
Page 8 of 10
SECTION E: SOLUTIONS TO SESSION 8 HOMEWORK
Doc.
No.
Day
Cash Receipts Journal of Liverpool Traders – June 2010
Cost of Debtors
Details
Fol.
Bank
Sales Sales control Discount
Allowed
30 Totals
B/S
B.Smith
B/S
Gerrard Bank
b/f
3350
No
982
779
12
910
200
200
16
16
3566
Doc.
1673
Fol: CRJ 27
Sundry Account
Amount
Fol.
Details
1673
982
779
12
Rent Income
Interest on current a/c
1126
Cash Payments Journal of Liverpool Traders – June 2010
Fol: CPJ 27
Day
Name of payee
Fol. Bank Trading Wages Debtors Creditors
Sundry Accounts
Control
Stock
Control
Discount Amount Fol.
Details
received
30 Totals
b/f
2 065
420
460
1 140
15
60
B/S
PE Insurance Co
100
B/S
J.Lang (cheque R/D)
120
B/S
Gerrard Bank
100
120
48
2333
Insurance
48
420
460
120
1140
15
Bank Charges
208
Page 9 of 10
SUBJECT
Grade 11
Session 8: BANK RECONCILIATION – TEACHER SET
GENERAL LEDGER OF LIVERPOOL TRADERS

BALANCE SHEET ACCOUNTS SECTION
Dr
2010
June
BANK
1
Balance
30
Sundry
Accounts
b/d
546
3566
Cr
2010
June
30
SUNDRY
Accounts
Balance
c/d
4112
July
1
Bal
b/d
2333
1779
4112
1779
BANK RECONCILIATION STATEMENT OF LIVERPOOL TRADERS AS AT 30 JUNE 201
DEBIT
CREDIT
Dr Balance as per bank a/c
1874
530
Cr outstanding deposit
Dr outstanding cheques: No. 0021
160
0024
220
0025
245
Dr balance as per bank a/c
1779
2404
The SSIP is supported by
Page 10 of 10
2404