BANK RECONCILIATION STATEMENT

This is a statement which is prepared to reconcile the cash book balance (bank
column only) with the bank statement balance
PURPOSE:
We need a bank reconciliation statement because there is always a difference
between the cash book balance (bank column only) and the bank statement balance
TO UPDATE CASH BOOK (BANK COLUMN ONLY):
Start with the closing balance of the bank account and record all the items that
were not recorded before.
1.
2.
3.
4.
5.

Bank Charge (CR)

Credit Transfer (DR)
Standing Order (CR)
Direct Debits (CR)
Dishonored Cheques (CR) received: debtors
Dishonored Cheques (DR) payment: creditors
6. Bank Interest: Paid (CR) Received (DR)
TO PREPARE THE BANK RECONCILIATION STATEMENT
Start with the closing balance of the updated cash book and record the items which
were not recorded on the bank statement (that is, the items that were in the cash
book only).
TO RECONCILE CASH BOOK BALANCE TO THE BANK STATEMENT
BALANCE FORMAT:
A. BANK RECONCILIATION STATEMENT
Balance as per update cash book
ADD Unpresented Cheques
LESS Late Lodgment
Balance as per Bank Statement

B. If there is an overdraft the format is reversed to reconcile the bank statement

to the cash book:
Balance as per Bank Statement
ADD Late Lodgment
LESS Unpresented Cheques
Balance as per Cash Book

BANK RECONCILIATION
Late Lodgment/ Lodgment Not Yet Credited:
Cheques received by the business but were not yet taken to the bank to be lodged
into the business bank account.
Unpresented Cheques:
Cheques paid out by the business, but the receiver of the cheque has not taken
them to the bank for it to be taken out of the business bank account
Standing Order:
Business informs its bank to make regular payments on its behalf. When this is
done the bank will reduce the amount in the account by debiting. This business will
in turn credit the amount in an up to dated cashbooks
Credit Transfer:
Persons who owe the business will settle by paying their debt directly into the
businesss bank account. Credit transfers will be credited by the bank to show an
increase in the account. The business will in turn debit the amount in an up to dated
cashbook
Direct Debit:
Persons to whom the business owes money will be authorized to make payments
directly from the businesss bank account. Direct debit will be debited by the bank
to show a decrease in the amount while the business will credit the amount in an
adjusted cashbook
Bank Charges:

The bank may charge for the services it performs on behalf of the business. It
simply takes money from the businesss account by debiting, thereby reducing the
balance. Bank charges will be credited in an adjusted cashbook
Dishonored Cheques:
Cheques which are paid to the businesss bank account but are later returned
because of faults found with the cheques. The bank deducts the amount by debiting
the account while the business will credit it in the adjusted cashbook.
N.B:
Any error such as the writing of the incorrect figure may be made in the cashbook
or at the bank. Errors must be corrected where they are made.