Bank reconciliation

Question 1

What does bank reconciliation improve the likelihood of? (2)

Answer 1

• The bank asset will be measured correctly in the SOFP

- The business catches any errors made by its bank

Question 2

What does the business immediately do?

Answer 2

It banks any cash it receives, and makes all payments using the bank account

Question 3

What is there no need for?

Answer 3

There is no need for petty cash accounts, or cash on hand accounts

Question 4

True or false, DR and CR are not switched from the bank (A) general ledger to the bank statement

Answer 4

False, DR and CR are switched as they are moved from the Bank (A) general ledger to the bank statement, i.e A debit of R20 000 on the bank general ledger becomes a R20 000 CR on the bank statement

Question 5

True or false, transactions are often delayed in time as they move from the bank (A) general ledger to the bank statement (takes a few days for them to reflect on bank statement)

Answer 5

True

Question 6

Where are “adjusting differences” updated?

Answer 6

They are updated in the general ledger

Question 7

Where are “reconciling differences” updated?

Answer 7

No update in general ledger or bank statements

Question 8

What are the two types of “Reconciling differences”? (2)

Answer 8

• Timing differences

- Errors

Question 9

Who’s error are “reconciling differences”?

Answer 9

The bank’s error

Question 10

Who’s error are “adjusting differences”?

Answer 10

The business’s error

Question 11

Define bank reconciliation

Answer 11

It identifies the reasons for the difference between the bank statement balance and the GL bank account balance

Question 12

What is the general layout of the bank reconciliation statement? (5)

Answer 12

1. Heading: Bank reconciliation statement as at xx/xx
2. Bank statement balance: from the end of bank statement either DR or CR
3. Deposits not yet processed
4. Payments not yet processed
5. Bank errors

Question 13

What is the process of bank reconciliations?

Answer 13

1. COMPARE:
   - This month’s bank statement
   - This month’s general ledger bank account
   - Last month’s bank reconciliation statement
2. ADJUSTING DIFFERENCES:
   - Process adjusting JE’s to update and rebalance the general ledger account
3. RECONCILING DIFFERENCES:
   - Timing differences and bank errors are processed on this months bank reconciliation statement