BANK RECONCILIATION
When we - the business - deposit money into the bank account, we become a
liability to the bank from the bank’s perspective. When we deposit money into our
account, our account is credited, and when money is withdrawn, our account is
debited.
OUR BOOKS:
Deposits Cheques (includes stale cheques
Receipts reissued and r/d cheques)
EFTs into the account EFTs
Cash Register tape Bank charges
Stale cheques Debit/stop orders
Increase the account on the debit side Decrease the account on the credit side
THE BANK’S BOOKS;
All cheques Receipts
EFTs Stale cheques
Stop/debit orders Cash register tape
Bank charges Deposits
R/d cheques EFTs
Decrease the account on the debit side Increase the account on the credit side
Why is it necessary to do bank reconciliation?
- We want the totals in our books and on the statement to agree.
- We also want to check for outstanding cheques, receipts, deposits, R/d
cheques, EFTs, stop/debit orders etc.
- It is a form of external control. By checking the documents in our books
against the Bank Statement, we ensure that no fraud has taken place or that
no errors have occurred - either on the Bank’s or the business’s side.
- It is necessary to update the cash journals with all the items on the Bank
Statement but not in them.
What do we work with when doing bank reconciliation?
- We work with the Bank statement
- We work with the previous month’s bank reconciliation statement
- We also work with cash journals.
They will never agree because there is always a time lag.
When we - the business - deposit money into the bank account, we become a
liability to the bank from the bank’s perspective. When we deposit money into our
account, our account is credited, and when money is withdrawn, our account is
debited.
OUR BOOKS:
Deposits Cheques (includes stale cheques
Receipts reissued and r/d cheques)
EFTs into the account EFTs
Cash Register tape Bank charges
Stale cheques Debit/stop orders
Increase the account on the debit side Decrease the account on the credit side
THE BANK’S BOOKS;
All cheques Receipts
EFTs Stale cheques
Stop/debit orders Cash register tape
Bank charges Deposits
R/d cheques EFTs
Decrease the account on the debit side Increase the account on the credit side
Why is it necessary to do bank reconciliation?
- We want the totals in our books and on the statement to agree.
- We also want to check for outstanding cheques, receipts, deposits, R/d
cheques, EFTs, stop/debit orders etc.
- It is a form of external control. By checking the documents in our books
against the Bank Statement, we ensure that no fraud has taken place or that
no errors have occurred - either on the Bank’s or the business’s side.
- It is necessary to update the cash journals with all the items on the Bank
Statement but not in them.
What do we work with when doing bank reconciliation?
- We work with the Bank statement
- We work with the previous month’s bank reconciliation statement
- We also work with cash journals.
They will never agree because there is always a time lag.
