Bank Reconciliation
Cash
Bo
ok
vs Ba
nk
Sta
tem
en
tCash Book is where
customer keeps his record
of all receipts and payments
of
cash
(includes any money-cash
or cheques. Reflects
both cash a/c
and bank a/c txns)
Bank statement -
perio
dic
reco
rdproduced by the bank
recording withdrawals,
lodg
men
ts, a
nd
ban
kch
arge
s o
n th
ecu
sto
me
r's a
cco
un
t
Cash Book vs
Bank Statement
Cash
bo
ok
DEBIT | CREDIT
Cash | Bank | Cash | Bank
Receive Cash - Debit
Cash column
Deposit C
heque -
Debit bank column
Draw a C
heque
- Credit Bank
Pays out Cash
- Credit Cash
Bank Statement
Incr
ea
se
in Balance -
The bank will
cre
dit a
cco
un
t
Decrease in balance
- the bank will
debit account
Pro
cedu
reCompare opening balances
of cashbook and bank
statement - ensure identical
on opposite sides
(balance b/d on DR side
of cash book = opening
balance on CR side
of the bank statement)
Assume positive balance
unless clearly indicated
otherwise - in cashbook
DR +ve balance
CR -ve balance
Ensure all items in
cashbook are in bank
sta
tem
en
t "o
n th
e
other side" - tick
com
mo
n ite
ms
Update the cashbook
- recording transactions
in the cashbook which
are not in it and found
only in the bank
sta
tem
en
t.Add items to cash book on
the other side
Balance as updated
cash book to determ
ine
true balance brought down
Prepare a reconciliation
statement including only
reco
nci
ling
item
s
Re
con
cilia
tion
Re
conci
liatio
n - re
conci
ling
differences between cashbook
and bank statement balances
Re
aso
ns
for
reco
nci
liatio
nWhere bank hasnt
reco
rde
d lo
dgm
ent
of cash or cheque
-late lodgment
Where cheques used
to m
ake payment to
3rd
party
and recorded in cash
book however 3rd party
has not yet negotiated
the
ch
eque
- unpresented cheques
Where instructions to
bank to make periodic
equal w
ithdrawals and
pay to 3rd party -
and no note m
ade
in cash book until
statement is received
- standing order
Where cheque used
by 3rd party has
been dishonored b/c
condition has not been
met - returned cheques
Where bank receives
money from 3rd party to
be paid into customer's
a/c - no record would
exists in the cash book
- direct credit
Where bank instructed
to pay sum directly to
3rd party w/o cheque
-di
rect
de
bit
Where bank withdraws funds
for its own use as part
of the agreement for maintenance
of bank account -
bank charges
Where bank has added funds
to the account as part
of the agreement w/ customer
- in
tere
stWhere recording errors
in either cashbook
or statement (note
if identical
error in both statement
no need for reconciliation,
only correction)
Re
con
cilia
tion
St
ate
me
nt
BEG
IN W
ITH
Cash
boo
k o
r Bank Statement Balance
Add or subtract
Re
conci
ling
item
s
End with opposite
bala
nce
to
th
at
at the beginning of the
reco
nci
liatio
nst
ate
me
nt
Exa
mpl
e
PETER CORINTH
BANK RECONCILIATION as at December 31, 2004
Balance as per bank statement 395,000
Less
unpresented
cheques
A. Acorn 18,000
B. Orc 29,000
47,000
348,000
Add
lodgements
not presented on bank statement 15,000
Balance as per cash book 363,000
