Where recording errors

in either cashbook
or statement (note
if identical
error in both statement
no need for reconciliation,
only correction)

Where bank has added funds

to the account as part
of the agreement w/ customer
- interest

Where bank withdraws funds

for its own use as part
of the agreement for maintenance
of bank account bank charges

Where bank instructed

to pay sum directly to
3rd party w/o cheque
-direct debit

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 cheque used

by 3rd party has
been dishonored b/c
condition has not been
met - returned cheques

Where instructions to
bank to make periodic
equal withdrawals and
pay to 3rd party and no note made
in cash book until
statement is received
- standing order

Where cheques used

to make payment to
3rd party
and recorded in cash
book however 3rd party
has not yet negotiated
the cheque
- unpresented cheques

Where bank hasnt

recorded lodgment
of cash or cheque
-late lodgment

Reasons for
reconciliation

Reconciliation - reconciling
differences between cashbook
and bank statement balances

Reconciliation

Bank Reconciliation

Cash Book vs
Bank Statement

Bank statement periodic record

produced by the bank
recording withdrawals,
lodgments, and bank
charges on the
customer's account

Cash 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)

Cash Book
vs Bank
Statement

Decrease in balance
- the bank will
debit account

Increase
in Balance The bank will
credit account

Bank Statement

Prepare a reconciliation
statement including only
reconciling items

Balance as updated
cash book to determine
true balance brought down

Update the cashbook

- recording transactions
in the cashbook which
are not in it and found
only in the bank
statement.
Add items to cash book on
the other side

Ensure all items in

cashbook are in bank
statement "on the
other side" - tick
common items

Assume positive balance

unless clearly indicated
otherwise - in cashbook
DR +ve balance
CR -ve balance

Compare 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)

Procedure

Pays out Cash

- Credit Cash

Draw a Cheque
- Credit Bank

Deposit Cheque Debit bank column

Receive Cash - Debit

Cash column

DEBIT | CREDIT
Cash | Bank | Cash | Bank

Cash book

End with opposite

balance to that
at the beginning of the
reconciliation
statement

Add or subtract
Reconciling items

BEGIN WITH
Cashbook or
Bank Statement Balance

Reconciliation Statement

395,000
cheques
18,000
29,000
47,000
348,000
Add
lodgements
not presented on bank statement
15,000
Balance as per cash book
363,000

Balance as per bank statement

Less
unpresented
A. Acorn
B. Orc

PETER CORINTH
BANK RECONCILIATION as at December 31, 2004

Example