15. Bank Reconciliations Flashcards
What does a debit/credit on a bank statement mean?
- A credit balance means you have money in the bank.
- A debit balance means you are overdrawn
What is a bank reconciliation?
Checking the bank statements against the cash account.
What is an unpresented cheque?
Cheques we have written, that have been entered in the cash account, but has not yet appeared on the bank statement.
What is a lodgement not yet credited?
Money received that has been entered in the cash account, but has not yet appeared on the bank statement.
What is a dishonored cheque?
A cheque we have received, that has been entered on the cash account, but we find out that the drawer has no money in their account.
What is a credit transfer?
A bank transfer.
What is a standing order?
An automatic transfer of a fixed amount at regular intervals.
What is a direct debit?
An automatic payment of a variable amount.
What are the three reasons why the bank statement may not equal the balance in the cash account?
- Cash book errors and omissions
- Bank mistakes
- Timing differences
What is a cashbook error/ommission?
When the incorrect figure is entered in the cash account/not entered at all.
What is a bank reconciliation statement?
A statement showing the balance in the bank statement, any errors and timing differences, and what should be the corrected balance in the cash account.
How do you prepare a bank reconciliation statement?
- Compare the cash account to the bank statement and tick off items that agree.
- Correct any errors in the cash account
- Prepare the statement
