Bank reconciliation

Question 1

What is a bank reconciliation?
Whats its objective?

Answer 1

–A bank reconciliation is a comparison between the bank balance recorded in the books of the business and the balance appearing on the bank statement.

–Objective = to reconcile the difference between bank account balance and the bank statemen

Question 2

What are the 3 reasons why we need bank reconciliations?

Answer 2

1- Check the accuracy of the bank account by agreeing balance to bank statement

2- Identify any bank account errors

3- Identify any bank account omissions

Question 3

Whats the Difference between Bank Account and Bank Statement? (3)

Answer 3

Errors

Unrecorded Items

Timing differences

Question 4

Standing Order defination

Answer 4

A firm can instruct its bank to pay regular amounts of money at stated dates to persons or other firms.
(loan repayments)

Question 5

Direct debit definition

Answer 5

A firm can allow creditors permission to obtain funds directly from the firm’s bank account – which allows the amounts collected to vary
(telephone bill)

Question 6

BACs definition:

Answer 6

Banks Automated Clearing System
A method of making payments electronically, with funds taking up to 3 days to clear.
Entered on day one, processed on day two and cleared on day three