Bank Reconciliation

Question 1

What are internal controls?

Answer 1

Systems & procedures placed by management to secure accuracy and reliability of accounting records as well as safeguard business assets.

Question 2

What is a bank reconciliation statement?

Answer 2

Statement used to check differences between the bank statement and cash book and ensure differences are explainable.

Question 3

What items are in the firm’s bank balance but not in the bank’s statement?

Answer 3

-Unpresented cheques: paid out by firm (recorded in cash book) but not presented to bank yet
-Uncredited cheques: received by firm (deposit recorded in cash book) but passing through bank clearing system, unclear until money received from drawer’s bank
place: bank reconciliation statement

Question 4

What items are in the bank’s statement but not in the firm’s bank balance?

Answer 4

-Withdrawals: from firm’s bank account (bank charges, standing orders & dishonnoured cheques)
-Deposits: into firm’s bank account (credit transfer from firm’s customers, investment dividend and deposit interest)
place:

Question 5

What are the causes for trial balance differences?

Answer 5

1. Error of omission (unknown customer paying)
2. Error of transposition (debit and credit different figures, have discrepancy)
3. Compensating error (2 unrelated errors that cancel each other out, one overcast and other undercast)
4. Error of commission (correct sum, wrong T-account)
5. Error of direction (debit entered as credit or vice versa)