Bank Financial Reconciliation Statement.pptx

This PPT describe how the company can reconcile its financial statements against bank statement. It has some solved practice questions also.

1. Bank Reconciliation Statement Contact: [email protected]

2. LEARNING OBJECTIVES • Distinguish and explain items appearing in the Bank Statement/Pass Book and Cash book (Bank Column). • Understand the need and the purpose of preparing the Bank Reconciliation Statement • Prepare the Bank Reconciliation Statement

3. INTRODUCTION The business expects the ending balance appearing in the bank statement is the same as the amount in the Cash Book (bank column). Thus, the purpose of Bank Reconciliation is to do necessary adjustments to our records in the cash book and come up with the same ending balance as recorded by the bank. It is an analysis explaining the difference between a business’s book balance of cash and its bank statement balance.

4. BANK STATEMENT Bank Statement is normally debited for payments or charges, and credited for receipts by the business. i . Examples of payments and charges: cheques drawn in favour of creditors or suppliers, bank charges, direct debits and standing order/instructions. ii. Examples of receipts: deposits of cash or cheques, dividend, interest on current account and bank GIRO credits or credit transfer.

5. Sample Bank Statement UITM BANK Shah Alam Statement of Account Account No. 654321 Date: 30April 2007 Date Particulars Debit Withdrawal Credit Deposit Balance April 1 Balance b/f 800.50 Cr April 3 Cash deposit 7,000.00 7,800.50 Cr April 4 Transfer from branch 2,500.00 10,300.50 Cr April 6 Cheque book 5.00 10,295.50 Cr April 8 70010 550.00 9,745.50 Cr April 10 70011 700.00 9,045.50Cr April 12 70012 430.00 8,615.50 Cr April 15 Direct deposit 645.00 9,260.50 Cr April 20 Direct Debit 574.00 8,686.50 Cr April 25 Interest 166.70 8,853.20 Cr April 28 Bank Charges 10.00 8,843.20 Cr

6. CASK BOOK (BANK COLUMN) Cash book or bank account is normally debited with receipts (deposits of cash or cheques) credited with payments (cheques drawn in favour of creditors or suppliers) of the business.

7. Differences between the bank account in the cash book and the bank statement are summarised as follows: Item s in Cash Book not in Bank Statement Items in Bank Statement but not in Cash Book Cheques not yet presented Bank charges and bank interests Amounts not yet credited Dishonoured cheques Errors in cash book Standing orders Credit transfers Direct Debits Errors on bank statement

8. Differences Between Bank Statement Balance and Bank Account Balance. a) Items recorded in the Bank account but not recorded by the bank: i . Deposits not yet credited . This happens when a business deposits money or cheques but the amount does not appear in the bank statement since the deposits has not yet been processed by the bank; but has already been recorded by the business. ii. Unpresented cheques . Cheques drawn for payment to creditors or others have not been cashed or banked, i.e., when cheques are drawn for payment and sent to creditors, the record in the business books has been made, but for some reasons the creditor is still carrying the cheque around and have not presented it to the bank for clearance.

9. Differences between bank statement balance and bank account balance. (b) Items recorded in the Bank Statement but not recorded by the business: Direct debit. The bank debited the account of the business for payments such as insurance premiums, rates, fees, subscriptions etc. Standing instructions order . This is quite similar to the direct debit in that the bank will debit the account of the business for payments such as insurance premiums, rates, subscriptions, etc. Bank service charge . This is a fee charged by the bank for operating the account for the business andlor issuing the cheque book.

10. Interest revenue on current account This interest is credited to the account of the business and is paid by certain bank based on large enough balance of cash in the account. Dishonoured cheques . A cheque, that the bank will not honour upon presentation by the business for clearance. However, the business has already accepted the cheque for the cash book settlement of a debt.

11. Differences between Bank Statement Balance and Bank Account Balance. (c). Errors Errors made by the bank - a cheque payment by a debtor had been debited to the business account by the bank, or a bank may make an error in recording the amount to be debited or credited. Errors made by the business - error in recording the amount to be debited or credited, or transactions are being debited to the cash book instead of being credited.

12. Stages in Bank Reconciliation 1. Compare the bank account in the cash book with the bank statement 2. Update the cash book 3. Correct any errors in the cash book 4. Balance the cash book and carry down the balances 5. Prepare a bank reconciliation statement .

13. Stages in Bank Reconciliation 1. Compare the bank account in the cash book with the bank statement 2. Update the cash book 3. Correct any errors in the cash book 4. Balance the cash book and carry down the balances 5. Prepare a bank reconciliation statement .

14. This amount was CREDITED in the BANK STATEMENT but it was not recorded in the CASH BOOK

15. Stages in Bank Reconciliation 1. Compare the bank account in the cash book with the bank statement 2. Update the cash book 3. Correct any errors in the cash book 4. Balance the cash book and carry down the balances 5. Prepare a bank reconciliation statement .

16. This amount was CREDITED in the CASH BOOK as $234 but it was DEBITED in the BANK STATEMENT as $243 ($9 difference )

17. This amount was CREDITED in the CASH BOOK as $234 but it was DEBITED in the BANK STATEMENT as $243 ($9 difference )

18. This amount was DEBITED in the BANK STATEMENT but it was not recorded in the CASH BOOK

19. This amount was DEBITED in the BANK STATEMENT but it was not recorded in the CASH BOOK

20. Stages in Bank Reconciliation 1. Compare the bank account in the cash book with the bank statement 2. Update the cash book 3. Correct any errors in the cash book 4. Balance the cash book and carry down the balances 5. Prepare a bank reconciliation statement .

21. BALANCE THE CASH BOOK WITH A BALANCE C/D AND BRING DOWN WITH A BALANCE B/D

22. BALANCE THE CASH BOOK WITH A BALANCE C/D AND BRING DOWN WITH A BALANCE B/D

23. Stages in Bank Reconciliation 1. Compare the bank account in the cash book with the bank statement 2. Update the cash book 3. Correct any errors in the cash book 4. Balance the cash book and carry down the balances 5. Prepare a bank reconciliation statement .

24. PREPARATION OF BANK RECONCILIATION STATEMENT b. P reparing the Bank Reconciliation Statement i . Start with balance as per updated bank account balance Bank Reconciliation Statement as at ….. Balance as per updated bank account xx Add: Unpresented cheques xx Less: Uncredited lodgements (xx ) Balance as per bank statement xxx ii. Start with balance as per bank statement Bank Reconciliation Statement as at…. Balance as per bank statement xx Add: Uncredited lodgements xx Less: Unpresented cheques (xx ) Balance as per updated bank account xxx https:// www.youtube.com / watch?v =fsXoXXuY6Q0