Bank Reconciliation, Cashbook, Petty Cash Book Flashcards
What are the main purposes of performing Bank Reconciliation?
1) Act as a deterrent against fraud.
2) Identify errors made by the bank or in the cash at bank account.
3) Explain differences between the cash at bank account and the bank statement.
Why is the cash at bank account debited when cash increases, while the bank statement is credited when cash increases?
Than cash at bank account is prepared by the business. Cash is an asset to the business, hence it is debited when it increases. The bank statement is prepared by the bank. Deposits are liabilities to the bank, hence they are credited when cash deposits increase.
Define a standing order.
A standing order is an instruction to the bank to pay another person at a specific later date.
Name two types of transactions that will appear in the cash at bank account but may not appear in the bank statement.
cheques not yet credited, cheques not yet presented.
Name the transactions that will appear in the bank statement but may not appear in the cash at bank account.
Direct credits, direct debits, standing orders, GIRO, bank charges, interest on bank loan, interest on bank deposits.
Why do cheques not yet credited / cheques not yet presented occur?
They occur due to timing differences since the bank receives information about the transaction at a later date from the company, and will therefore record the transaction at a later date.
Define cash at bank
Cash at bank is a current asset recording money deposited in the business bank account.
Define cash in hand
Cash in hand is a current asset recording the physical money (dollar notes and coins) kept for business use.
Explain what is meant by an imprest amount.
The imprest amount is the maximum amount of cash kept in the petty cash fund.
What is a petty cash fund?
Petty cash refers to small amounts of cash in hand kept on the business premises for small value purchases or expenses.
