1. Bank Reconciliation Statement

2. Learning Objectives
Explain the functions of a bank reconciliation statement
Explain the causes of differences of the balance of the cash book and balance in the bank statement
Update cash book
Prepare a bank reconciliation statement

3. Methods of Payment and Receipt
Cheques receipt
Bank interest income
Credit transfer (C/T)
Cheques payment
Bank charges
Interest charges
Standing order (S/O)
Direct debit (D/D) or Autopay

4. Payment by Bank
Standing Order is the instruction given by the depositor to the bank to make regular payment with a fixed amount to a specific person automatically from the depositor’s bank account.
Direct debit or autopay is the instruction given by the depositor to his / her creditor’s bank to collect the money with a variable amount directly from the depositor’s bank account from time to time.

5. Record Transactions Cash Book Receipt / Deposit - Dr.
(increase in asset)
Payment / Withdrawal
- Cr.
(decrease in asset)
Bank Statement
Deposit
- Cr.
(increase in liability)
Withdrawal
- Dr.
(decrease in liability)

6. Cheque Post-dated cheque Stale cheque Dishonoured cheque
Unpresented cheque
Uncredited cheque / Uncredited deposit

7. Dishonoured Cheques
Cheques which cannot be converted as money when presented at the bank
Possible reasons: Refer to drawer / Post-dated / Insufficient fund

8. Unpresented Cheques
They have not been presented to the bank for money.
Stale cheques are cheques not presented for more than six months from the date of issue.

9. Reasons for Differences
Time differences in recording
Errors occurred on the Bank account of the Cash Book and / or the Bank Statement

10. Bank Reconciliation Statement
It is a statement to highlight
and explain the differences
between the balance of
bank statement and the
balance of the bank
account of the cash
book of a business.

11. Bank Reconciliation Statement
It ensures the users the difference between the balance in bank statement and the balance in cash book can be justified with reasons.

12. Items in Bank Reconciliation Statement
Cash Book
Bank Statement
Dr.
Cr.
Unpresented cheques
Uncredited deposits
Error on cash book
Bank charges
Standing order/direct debit
Dishonoured cheques

13. Items in Bank Reconciliation Statement
Cash Book
Bank Statement
Dr.
Cr.
Post-dated cheques
Stale cheques
Credit transfer
Error on bank statement

14. Preparation of a bank reconciliation statement
Enter ALL adjustments in the bank reconciliation statement
Update cash book as well as prepare a bank reconciliation statement

15. Do your exercise now!