12. BANK RECONCILLIATIONS

Question 1

Where does the balance in the cash account go?

Answer 1

To the SFP

Question 2

What are possible timing differences between the cashbook and the bank balance?

Answer 2

Unpresented cheques (written and not yet received)
Uncleared lodgement (received by us but not yet credited by the bank)

Question 3

What types of errors require no adjustment to the company cash book value?

Answer 3

Timing differences and bank errors - left as reconciling items to explain the difference

Question 4

What items should be made as corrections to the cash book value?

Answer 4

-Cashbook errors
-Standing orders not recorded in cashbook
-Bank charges or interest not yet recorded
-Dishonored cheques not written off

Question 5

If a business has cash, how is it shown on the SFP?

Answer 5

A debit balance (overdraft is credit balance - liability)

Question 6

What does being ‘in credit’ with the bank mean?

Answer 6

Having positive cash in the bank (bank owes us)