BANK RECONCILIATION STATEMENT

 Bank Reconciliation Statement is the process of bringing to agreement the cashbook

[bank account] and the bank statement balances that are different

 The cash book is maintained in the business by its staff whereas the bank statement is
maintained by banking staff at the bank

Reasons For Preparing the Bank Reconciliation Statement

 To reconcile the cash book balance with the bank statement balance

 To determine the bank balance to be included in the balance sheet

 To explain the difference between cash book balance and the bank balance

 To locate errors and take appropriate action

DIFFERENCES BETWEEN THE CASH AND THE BANK STATEMENT BALANCES

 Un-presented Cheques – these are cheques drawn for payment and have not yet been
presented to the bank

 Late lodgements- these are cheques that have been presented to the bank but have not
been recorded on the bank statement

 Credit transfer/ Bank Giro credit - an amount paid by someone directly into the bank

 Bank charges – the money charged by the bank to the account holder for services
provided and it includes cheque book fees etc.

 Direct debits – this is where we give permission for an organization to collect amounts
owing direct from our account

 Standing order- is an instruction to the bank to make regular payments of fixed amount
on behalf of an account holder for a particular time e.g. insurance, rent

 Dishonoured cheques- is one against which the bank refuses to make payments due to
insufficient funds, wrong signature, alterations etc.

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Example #1

Up Dated Cash Book [Bank A/C Only]

Date Details $ Date Details $

Balance b/d XX Standing order XX
Credit transfer XX Bank charges XX
Interest received XX Direct debits XX
Dividend XX Dishonoured cheque XX
Balance c/d XX
XX 2923

Balance b/d XX

Bank Reconciliation Statement for the month of…….

$ $
Balance as per Cash book XX
Add un-presented cheques XX
XX
Less late lodgements XX
Balance as per Bank Statement XXX

Example #2 – Starting the Bank Reconciliation Statement with Bank statement Balance

Bank Reconciliation Statement for the month of…….

$ $
Balance as per Bnak statement XX
Add late lodgements XX
XX
Less un-presented cheques XX
Balance as per Cash Book XXX

Example # 3 - Overdraft Balances in the Cash Book

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 Up Dated Cash Book [Bank A/C Only]

Date Details $ Date Details $

Balance b/d XX Standing order XX
Credit transfer XX Bank charges XX
Direct debits XX
Balance c/d XX Dishonoured cheque XX

XX XX
Balance b/d XX

Bank Reconciliation Statement for the month of….

$ $
Overdraft Balance as per Cash book XX
Add late lodgements XX
XX
Less un-presented cheques XX
Overdraft Balance as per Bank Statement XXX

Question 1 Cash Book (bank Column only)

2007 $ 2007 $

Jun 1 Balance b /f 2 379 Jun 5 D. Blake 150

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Jun 7 B. Green 158 Jun 12 J. Gray 433

Jun 16 A. Silver 93 Jun 16 B. Stephens 88

Jun 28 M. Brown 307 Jun 29 Orange Club 57

Jun 30 K. Black 624 Jun Balance c/d 2 833

3 561 3 561

July 1 Balance b/d 2833

Bank Statement

2007 DR - CR + BALANCE
$ $
Jun 1 Balance b/f 2 379
Jun 7 Cheque 158 2 537
Jun 8 D. Blake 150 2 387
Jun 16 Cheque 93 2 480
Jun 17 J. Gray 433 2 047
Jun 18 B Stephens 88 1 959
Jun 28 Cheque 307 2 266
Jun 29 Standing Order 44 2 222
Jun 30 Credit Transfer 90 2 312
Jun 30 Bank Charges 70 2242

I. Prepare the Adjusted/Up-to-date cash book for the month of June 2007.
II. Prepare the Bank Reconciliation Statement for the month of June 2007 OR
III. Prepare the Bank Reconciliation Statement for the month of June 2007 starting with the
bank statement balance.

Question 2

Kelly Enterprise’s Cash Book

2004 $ 2004 $
Nov 1 Balance b/d 58 175 Nov 7 M. Walker [094266] 13 750
Nov 3 A. Beckford 10 457 Nov 13 Price Plus [094267] 23 500
Nov 4 Cash 17 823 Nov 20 G Harris [ 094268] 7 400
Nov 19 Cash 9 400 Nov 30 balance c/d 57 552
Nov 25 H Lindo 6 347
102 202 102 202

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Dec 1 balance b/d 57 552

Bank Reconciliation Statement

2004 Dr- Cr+ Balance

$ $
Nov 1 Balance b/d 58 175
Nov 5 Cash deposit 17 823 75 998
Nov 10 094266 13 750 62 248
Nov 11 T. Brown- Credit transfer 11 000 73 248
Nov 17 094267 23 500 49 748
Nov 19 Interest 1200 50 948
Nov 21 Cash 6347 57 295
Nov 26 H. Lindo- 9 400 66 695
Nov 27 Dishonoured cheque 6 347 60 348
Nov 28 Bank charges 24 100 36 248

Required:

I. Prepare Kelly’s Up-to-date cash book for the month of November 2014.
II. Prepare the Bank Reconciliation Statement for the month of November 2014.
III. Prepare the Bank Reconciliation Statement for the month of November 2014 starting
with the bank statement balance.

Question 3 [JUNE CSEC 2003 ]

Cash Book [Bank Column Only]

Date Details $ Date Details $
2001 2001
July 1 Balance b/d 1000 July 5 V. Enterprise [#671] 400
10 Cash 250 7 Water works [#672] 200
17 G Thompson 75 19 Y. Gillbert [#673] 50
22 C. Coombs 75 23 C. Camper [#674] 125
27 Y. Davis 110 25 General stores [ #675] 100
29 E. Ellis 65 27 Gents supplies [# 676] 175
29 Gas Supplies [ #677] 205
31 Balance c/d 320
1575 1575
Aug 1 Balance b/d 320

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 Bank Statement of Ruby Brown
Date Details Debit - Credit + Balance
2001 $ $ $
July 1 Balance 1000 CR
10 250 1250 CR
17 75 1325 CR
19 Cheque # 673 50 1275 CR
23 Cheque #674 125 1150 CR
25 Cheque#675 100 1050 CR
27 Cheque #676 175 875 CR
28 Credit transfer 200 1075 Cr
29 Standing Order 100 975 CR
30 Bank Charges 50 925 CR

Required: Prepare (i) the up-to date cash book (ii) the bank reconciliation statement for the
month of July 2001.

Question 4

Greene’s Cash Book

2016 2016
March 16 N. Marsh 244 March 1 Balance b/d 5 197

March 21 K . Alex 333 March 6 L. Tulloch 122

March 31 U. Sing [LL] 160 March 30 A. Ben 208

March 31 Balance c/d 5 280 March 30 J. Shaw 490

6 017
6 017

April 1 Balance b/d 5 280

Bank Statement for the month March 2006

2016 DR CR Balance
$ $ $
March 1 Balance 5 197 OD
March 8 L. Tulloch 122 5 319 OD
March 16 Cheque 244 5 075 OD
March 20 A Ben 208 5 283 OD
March 21 Cheque 333 4 950 OD
March 31 M. Turnbull: trader’s credit 57 4 893 OD
March 31 BKS : standing order 49 4 942 OD
March 31 Bank Charges 28 4 970 OD

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Required:
i) Prepare Greene’s up-to-date cash book for the month of March 20016
ii) Prepare the bank reconciliation statement for the month of March 2016.

Question 5 [CSEC JUNE 2015 ]

The bank statement and cash book (bank columns only for Orvie Elwin for the month of October
are as follows.

Cash Book (bank columns only)

Date Details $ Date Details $
Oct 01 Balance b/d 900 Oct 10 Light &Power Company 180
Oct 03 T. Simeon 150 Oct 13 Vehicle loan 1700
Oct 07 Cash Sales 850 Oct 29 Rent 2300
Oct 24 D. Elwin 500
Oct 31 Balance c/d 1780 ____
4180 4180
Nov 01 Balance b/d 1780

Bank Statement for the month October 2014

2014 DR CR Balance
$ $ $
Oct 1 Balance b /f 900
Oct 3 T. Simeon 150 1050
Oct 7 Cash sales deposit 850 1900
Oct 13 Vehicle loan 1700 200
Oct 15 Standing order 1000 (800) O/D
Oct 21 Debit transfer 825 (1625) O/D
Oct 29 Rent 2300 (3925) O/D
Oct 29 Credit transfer 4000 75
Oct 30 Bank charges 400 (325)

(a) Prepare the updated cash book to show the adjusted balance. (6 marks)

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 (b) Draw up the bank reconciliation statement for Orvie Elwin for the month of October
2014. (5 marks)

Question 6 - [CSEC June 2008 ]

On April 2, 2007, A Khan received a bank statement from his account for the month of March
which showed an overdrawn balance of $1405. On careful examination the following
discrepancies were found.

1. The bank had charges of $20 which was not recorded in the cash book

2. The cheque of $1800 received from Shivers on March 8 had been dishonoured

3. Standing orders for insurance premiums of $700 had been paid by the bank. This has not
been recorded in the cash book.

4. The cheque for $500 drawn for personal use on March 27 was not among the cancelled
cheque returned by the bank with the statement. The was also no record of it on the bank
account. UP Cheques

(i) Update Khan’s Cash Book starting with the closing balance in his cash book from (a)
above.

(ii) Prepare Khan’s Bank Reconciliation Statement as at March 31, 2008.

Question 7 [CSEC JUNE 2016]

In September Grenade’s Cash book showed an overdrawn balance of $3400 which did not
agree with the balance on his bank account. In checking his cash book with his bank statement
Grenade observed the following:

i. A cheque paid to Blue for $1238 was correctly entered in the bank statement but entered
in the cash book as $1328. Dr Blue $90 [1328-1238]- in the updated cash book]
ii. Bank charges for the month of $100 were entered on the bank statement but NOT in the
cash book.
iii. The bank paid Grenades insurance of $900 as instructed by standing order.
iv. Deposit of $8000 made to the bank on 29 September did NOT appear on the bank
statement.
v. Dividends of $2100 was paid directly to Grenade’s bank account.
vi. Four cheques totalling $5200 have NOT been posted to the bank for
prompt payment.
vii. A cheque for $300 received from Yellow on 02 September had been returned by the
bank for insufficient funds.

a) Prepare Grenade’s updated cash book for the month of September. (9)
b) Prepare Grenade’s Bank Reconciliation Statement for month of September. (4)
c) List two bank statement items which would be used to adjust the net income if the net
income was calculated before the bank statement was received .(2)

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d) List ONE internal user and ONE external user of accounting information