1. Introduction to bank reconciliation

2. Spot the differences

3. Bank Reconciliation
A bank reconciliation is the process of matching
the balances in the business records to the bank
records.
The goal is to find the differences between the
two (business records vs bank records) and
making changes to the business records as
appropriate.
Q: Why do business do bank reconciliation?

4. Why do bank reconciliation?
• Identify any errors committed by the business or
the bank (rare).
• Helps the business identify the actual amount of
cash available to spend.
• Without bank reconciliation you expose your
business to risk. Risk of people stealing from your
account.

5. Why do bank reconciliation?
• The bank reconciliation may also show any undue
delay in the clearance of cheques.
• A balanced bank reconciliation provides
confidence in the accuracy of the business
records.

6. Bank Records: Business Records:
Bank Statement Compare • Cash receipts
journal
• Cash payment
journal
Find the differences • Cash at bank
account
Tick each entry that appears in both sets of records
And circle the entries do not appear in both set of records
Entries found in the bank records but missing in the business
records should be added to the business records
Prepare a cash balance summary
Prepare a bank reconciliation statement.

7. What is a bank statement?
A bank statement is a document that is issued by a
bank once a month to its customers.

8. What information does the bank statement
provide?
• The beginning cash balance in the account
• + The deposited cheques and cash
• - Cash withdrawn from the account
• - Cheques paid out
• + Interest earned on the account
• - Bank charges against the account
• = Ending cash balance in the account

9. 1) The business owner (Mr. A) makes a cash sale of
$200 and deposit the cash into the bank (NAB).
• What is the double entry for the business?
DR Cash $200, CR Sales $200
• What is the double entry for the bank?
DR Cash $200, CR Bank statement (deposit) $200
The $200 the bank received is not from sales, but an
obligation/liability to return the $200 to the business owner
on demand.

10. Bank Interest earned
Bank automatically add interest to the account.
When you open an account at a bank, the bank
will pay you to keep your money at their bank.

11. Bank charges
Bank automatically deducts charges from the
account.
Examples
• Monthly bank service charge - cost of
maintaining an account.
• Bank charges a fee when a cheque is returned
for insufficient funds.
• Bank charges a fee on an overdraft account.

12. 2) Mr. A’s bank (NAB) deducts a bank charge of $6.
• What is the double entry for the business?
DR Bank charges $6, CR Cash $6
• What is the double entry for the bank?
DR Bank statement $6, CR Bank service charge revenue $6
When bank charges Mr. A $6, the bank earns $6.

13. Bank Statement
Date Description DR CR Balance
XXX Balance b/f 0
XXX Cash Sales 200.00 √ 200.00 CR
XXX Bank interest earned 5.00 205.00 CR
XXX Monthly bank service charge 6.00 √ 199.00 CR
Missing in cash receipts journal
Cash receipts journal (DR)
Date Particulars Rec no. Debtors Cash sales Sundries Bank
xxx Cash sales xx 200.00 200.00 √
200.00
Cash payments journal (CR)
Date Particulars Chq no. Creditors Cash Purchase Sundries Bank
xxx Monthly bank service charge 5.00 5.00
5.00
Mr. A made an error

14. Bank reconciliation & Reconciling Items

15. Reconciling Items
• Unrecorded deposits
• Unpresented cheques
• Business errors and Bank errors (rare)
• Bank Transfer /EFT
• Bank Interest earned
• Bank charges

16. Case Study
Bella needs to buy a
beautiful prom dress for
the prom night.
Mr John Brown is a
fantastic tailor and he
owns a neighbourhood
dress shop.
Bella decides to purchase
a custom made dress
which cost her $700.

17. Unrecorded deposits
Bella gave John a cheque of $700.
John entered this transaction into his cash
receipts journal.
At the end of the day, he deposited the
cheque into his bank account.
John’s bank did not have a chance to process the
cheque; and the bank statement has already been
prepared.

18. Unrecorded deposits
Receipts that have been recorded in the cash
receipts journal and taken to the bank at the
end of the day; but at that time the bank
statement has been prepared; and the bank
have not processed those receipts.

19. Unpresented cheques
John ordered some silk cloth from Jay
Enterprise to make Bella’s prom dress.
He wrote a cheque of $200 to Jay
Enterprise and sent it by mail.
He entered this transaction into his cash payments
journal.
John’s bank statement has already been prepared,
but the cheque has not been presented for payment
at the bank.

20. Unpresented cheques
Cheques that have been written, sent and
recorded in the cash payments journal; but at
that time the bank statement has been
prepared; and the cheques have not been
presented for payment at the bank.

21. Bank Statement
Date Particulars Debits Credits Balance
01/04/2012 Balance brought forward 2,565.00 CR
04/04/2012 C/c 2,300.00 4,865.00 CR
05/04/2012 276 1,200.00 3,665.00 CR
09/04/2012 C/c 500.00 4,165.00 CR
11/04/2012 277 2,800.00 1,365.00 CR
15/04/2012 Monthly service charge 10.00 1,355.00 CR
16/04/2012 Interest 6.00 1,361.00 CR
17/04/2012 278 1,500.00 139.00 DR
17/04/2012 Fee - overdrawn account 30.00 169.00 DR
18/04/2012 C/c 200.00 31.00 CR
20/04/2012 C/c 2,400.00 2,431.00 CR
23/04/2012 C/c 200.00 2,631.00 CR
26/04/2012 279 2,000.00 631.00 CR
30/04/2012 Returned Cheque - Nancy 200.00 431.00 CR
30/04/2012 Fee - returned cheque 25.00 406.00 CR
C/c = Cash and Cheques deposited
Cash receipts journal (DR)
Date Particulars Rec no. Debtors Cash sales Sundries Bank
3/04/2012 Angel Bridal Shop 128 2,300.00 2,300.00
8/04/2012 Wendy CRR 500.00 500.00
17/04/2012 Nancy 129 200.00 200.00
19/04/2012 Kelly Fashion 130 2,400.00 2,400.00
22/04/2012 Sewing equipment CRR 200.00 200.00
30/04/2012 Bella 131 700.00 700.00
-
5,600.00 500.00 200.00 6,300.00
CRR = Cash register roll - money received over the counter.

22. Bank Statement
Date Particulars Debits Credits Balance
01/04/2012 Balance brought forward 2,565.00 CR
04/04/2012 C/c 2,300.00 4,865.00 CR
05/04/2012 276 1,200.00 3,665.00 CR
09/04/2012 C/c 500.00 4,165.00 CR
11/04/2012 277 2,800.00 1,365.00 CR
15/04/2012 Monthly service charge 10.00 1,355.00 CR
16/04/2012 Interest 6.00 1,361.00 CR
17/04/2012 278 1,500.00 139.00 DR
17/04/2012 Fee - overdrawn account 30.00 169.00 DR
18/04/2012 C/c 200.00 31.00 CR
20/04/2012 C/c 2,400.00 2,431.00 CR
23/04/2012 C/c 200.00 2,631.00 CR
26/04/2012 279 2,000.00 631.00 CR
30/04/2012 Returned Cheque - Nancy 200.00 431.00 CR
30/04/2012 Fee - returned cheque 25.00 406.00 CR
C/c = Cash and Cheques deposited
Cash payments journal (CR)
Date Particulars Chq no. Creditors Cash Purchases Wages Rent Sundries Bank
4/04/2012 Rent 276 1,200.00 1,200.00
10/04/2012 Sewing machine 277 2,800.00 2,800.00
16/04/2012 Natalie - employee 278 1,500.00 1,500.00
25/04/2012 AB Fabric Pty Ltd 279 2,000.00 2,000.00
30/04/2012 Jay Enterprise 280 200.00 200.00
-
2,200.00 2,800.00 1,500.00 1,200.00 - 7,700.00

23. Bank Statement
Date Particulars Debits Credits Balance
01/04/2012 Balance brought forward 2,565.00 CR
04/04/2012 C/c 2,300.00 √ 4,865.00 CR
05/04/2012 276 1,200.00 3,665.00 CR
09/04/2012 C/c 500.00 √ 4,165.00 CR
11/04/2012 277 2,800.00 1,365.00 CR
15/04/2012 Monthly service charge 10.00 1,355.00 CR
16/04/2012 Interest 6.00 1,361.00 CR
17/04/2012 278 1,500.00 139.00 DR
17/04/2012 Fee - overdrawn account 30.00 169.00 DR
18/04/2012 C/c 200.00 √ 31.00 CR
20/04/2012 C/c 2,400.00 √ 2,431.00 CR
23/04/2012 C/c 200.00 √ 2,631.00 CR
26/04/2012 279 2,000.00 631.00 CR
30/04/2012 Returned Cheque - Nancy 200.00 431.00 CR
30/04/2012 Fee - returned cheque 25.00 406.00 CR
C/c = Cash and Cheques deposited
Cash receipts journal (DR)
Date Particulars Rec no. Debtors Cash sales Sundries Bank
3/04/2012 Angel Bridal Shop 128 2,300.00 2,300.00 √
8/04/2012 Wendy CRR 500.00 500.00 √
17/04/2012 Nancy 129 200.00 200.00 √
19/04/2012 Kelly Fashion 130 2,400.00 2,400.00 √
22/04/2012 Sewing equipment CRR 200.00 200.00 √
30/04/2012 Bella 131 700.00 700.00
5,600.00 500.00 200.00 6,300.00
CRR = Cash register roll - money received over the counter.

24. Bank Statement
Date Particulars Debits Credits Balance
01/04/2012 Balance brought forward 2,565.00 CR
04/04/2012 C/c 2,300.00 √ 4,865.00 CR
05/04/2012 276 1,200.00 √ 3,665.00 CR
09/04/2012 C/c 500.00 √ 4,165.00 CR
11/04/2012 277 2,800.00 √ 1,365.00 CR
15/04/2012 Monthly service charge 10.00 1,355.00 CR
16/04/2012 Interest 6.00 1,361.00 CR
17/04/2012 278 1,500.00 √ 139.00 DR
17/04/2012 Fee - overdrawn account 30.00 169.00 DR
18/04/2012 C/c 200.00 √ 31.00 CR
20/04/2012 C/c 2,400.00 √ 2,431.00 CR
23/04/2012 C/c 200.00 √ 2,631.00 CR
26/04/2012 279 2,000.00 √ 631.00 CR
30/04/2012 Returned Cheque - Nancy 200.00 431.00 CR
30/04/2012 Fee - returned cheque 25.00 406.00 CR
C/c = Cash and Cheques deposited
Cash payments journal (CR)
Date Particulars Chq no. Creditors Cash Purchase Wages Rent Sundries Bank
4/04/2012 Rent 276 1,200.00 1,200.00 √
10/04/2012 Sewing machine 277 2,800.00 2,800.00 √
16/04/2012 Natalie - employee 278 1,500.00 1,500.00 √
25/04/2012 AB Fabric Pty Ltd 279 2,000.00 2,000.00 √
30/04/2012 Jay Enterprise 280 200.00 200.00
2,200.00 2,800.00 1,500.00 1,200.00 - 7,700.00

25. Cash receipts journal (DR)
Date Particulars Rec no. Debtors Cash sales Sundries Bank
3/04/2012 Angel Bridal Shop 128 2,300.00 2,300.00 √
8/04/2012 Wendy CRR 500.00 500.00 √
16/04/2012 Interest 6.00 6.00 √
17/04/2012 Nancy 129 200.00 200.00 √
19/04/2012 Kelly Fashion 130 2,400.00 2,400.00 √
22/04/2012 Sewing equipment CRR 200.00 200.00 √
30/04/2012 Bella 131 700.00 700.00
30/04/2012 Returned Cheque - Nancy (200.00) (200.00) √
5,400.00 500.00 206.00 6,106.00
Cash payments journal (CR)
Date Particulars Chq no. Creditors Cash Purchases Wages Rent Sundries Bank
4/04/2012 Rent 276 1,200.00 1,200.00 √
10/04/2012 Sewing machine 277 2,800.00 2,800.00 √
15/04/2012 Monthly Service charge 10.00 10.00 √
16/04/2012 Natalie - employee 278 1,500.00 1,500.00 √
17/04/2012 Fee - overdrawn account 30.00 30.00 √
25/04/2012 AB Fabric Pty Ltd 279 2,000.00 2,000.00 √
30/04/2012 Jay Enterprise 280 200.00 200.00
30/04/2012 Fee - returned cheque 25.00 25.00 √
2,200.00 2,800.00 1,500.00 1,200.00 65.00 7,765.00

26. Cash balance summary as at 30 April 2012
$ Opening balance from bank
Opening balance 2,565.00 statement
Add cash receipts 6,106.00 Total from cash receipts
journal
Less cash payments 7,765.00 Total from cash payments
journal
Closing balance 906.00
Bank reconciliation statement as at 30 April 2012 MATCH
$ Closing balance from bank
Balance as per bank statement 406.00 CR statement
Item circle/ highlight from
Add Unrecorded deposit 700.00
cash receipts journal
Less Unpresented cheques 200.00 Item circle/ highlight from
cash payments journal
Balance as per business cash records 906.00 CR