Chapter 11 ; Bank reconciliations

Bank statement

A document that shows all the money that has gone into or out of the bank account during a particular period of time

Deposit

An amount of money that is paid nto the bank account

Interest received

An amount of money that is received into the bank account from the bank, earned on the balance of the account at regular intervals

Interest charged

An amount of money that the bank charges the account holder for lenging the account holder money

Standing order

An instruction to the bank to regularly pay a set amount of money from the account holders account to another person, or organisation

Direct debit

Regular payment from one account to another

BACS

Easy way of transferring money electronically from one financial institution to another. Can take between 3 to 5 working days to clear

CHAPS

Same day transfer of money from one institution to another, there is usually a charge for this

Reasons why cash book may not match with bank statement

Uncleared lodgements of cheques

Unpresented cheques that are updated on cashbook but not on bank statement

Unrecorded trasactions

Uncleared lodgement

A cheque that has been paid into the bank but not yet cleared, the cashbook would be up to date

Unpresented cheques

Cheques that have been written and paid by the business but may have not yet been received by the bank or not cleared, the cashbook would be up to date

Unrecorded transactions

Transactions that are present in the bank statement but have not yet been recorded into the cashbook.

Examples include BACS, CHAPS bank charges, direct debits or standing orders

Bank reconciliation pro forma

Takes the balance per the bank statement and adds uncleared lodgements and minus unpresented cheques. This should make balance per cashbook