Bank reconciliation statement

Question 1

Explain two purposes of preparing bank reconciliation.

Answer 1

1) To check the cash at bank balance of the business against the balance on the bank statement (main purpose)
2) Check for any errors in the cash at bank account or bank statement
3) Update the cash at bank account
4) Acts as deterrence against fraud

Question 2

Explain why the cash at bank account balance and bank statement balance are different.

Answer 2

1) transactions are recorded at different times by the business and the bank
2) errors in recording by the business or the bank.

Question 3

Explain the meaning of the following:

Direct deposit/Credit transfer

Answer 3

Bank collected money directly from the business’ customers

Question 4

Explain the meaning of the following:

Direct payment/Direct debits

Answer 4

Payments made directly by the bank on behalf of the business

Question 5

Explain the meaning of the following:

Cheques not yet presented

Answer 5

The business had issued the cheques but the creditor had not presented the cheque for payment.

Question 6

Explain the meaning of the following:

Cheques not yet credited

Answer 6

The business had deposited the cheques with the bank but the bank had not processed the cheque yet.