Accounting
Bank Reconciliation
Overdrafts
- Bank lends you money that you don’t have in your account
- A liability to the trader (owed to the bank)
- An asset to the bank
- Books of trader: Dr- favourable & Cr - Unfavourable
- Bank’s books: Dr - Unfavourable & Cr - favourable
Daily and month-end procedures
1. Daily procedures
- Bank deposits
- Cheques
2. Month-end procedures
- Compare bank statement with bank columns of journals (Identify differences)
- Update journals & post to ledger (Items found in bank statement)
- Draw up Bank recon statement (Items found in journals)
- Balance of Bank account = Balance in bank statement
Dishonoured cheques
- Reversed in the cpj
- Bank decreases (favourable) or increases (Unfavourable: overdraft)
- Debtors control increases
- Reasons for dishonoured cheques
- Insufficient funds
- Drawer stopped payment
- Drawer is insolvent
- Drawers account is closed at banks
- Cheque is stale (more than 6 months)
- Cheque is post-dated
Reconciling bank statement & cash journals
1. Bring down the opening balance of the bank acc in the general ledger. Dr: favourable & Cr: unfavourable
2. Enter month end balance of current bank acc to bank recon. Dr: Unfavourable & Cr: Favourable
3. Compare credit entries of b/s to CRJ bank column (highlight missing ones in both)
4. Compare debit entries of b/s to CPJ bank column (highlight missing ones in both)
5. Total journals and post to bank in general ledger & balance
6. Prepare Bank reconciliation statement
Bank Reconciliation
Overdrafts
- Bank lends you money that you don’t have in your account
- A liability to the trader (owed to the bank)
- An asset to the bank
- Books of trader: Dr- favourable & Cr - Unfavourable
- Bank’s books: Dr - Unfavourable & Cr - favourable
Daily and month-end procedures
1. Daily procedures
- Bank deposits
- Cheques
2. Month-end procedures
- Compare bank statement with bank columns of journals (Identify differences)
- Update journals & post to ledger (Items found in bank statement)
- Draw up Bank recon statement (Items found in journals)
- Balance of Bank account = Balance in bank statement
Dishonoured cheques
- Reversed in the cpj
- Bank decreases (favourable) or increases (Unfavourable: overdraft)
- Debtors control increases
- Reasons for dishonoured cheques
- Insufficient funds
- Drawer stopped payment
- Drawer is insolvent
- Drawers account is closed at banks
- Cheque is stale (more than 6 months)
- Cheque is post-dated
Reconciling bank statement & cash journals
1. Bring down the opening balance of the bank acc in the general ledger. Dr: favourable & Cr: unfavourable
2. Enter month end balance of current bank acc to bank recon. Dr: Unfavourable & Cr: Favourable
3. Compare credit entries of b/s to CRJ bank column (highlight missing ones in both)
4. Compare debit entries of b/s to CPJ bank column (highlight missing ones in both)
5. Total journals and post to bank in general ledger & balance
6. Prepare Bank reconciliation statement
