Bank Reconciliations Flashcards
Why are Bank Statements such important documents?
- Are an independent record from any accounting software
- allows for reconciliations against Bank GL
- not many independent records are available in accounting
What are the type of difference that could occur when reconciling?
- Timing Difference (Bank)
- Error by Business (GL)
What are the different timing issues that could occur?
- uncleared electronic receipts/payments
- outstanding lodgements/deposits credited after date (income sent but not received in bank)
- unpresented/outstanding cheques (cheques given to suppliers not taken yet)
What types of errors could be found made by business in GL Bank Account?
- Omissions (DDs, bank charges, interest)
- Transposition Errors (wrong numbers as mixed round)
- Casting Errors (adding incorrectly)
What does a debit/credit balance mean in the Bank GL Account?
Debit = Asset = Positive Bank Balance
Credit = Liability = Negative Bank Balance (Overdraft)
What does a debit/credit balance mean in the Bank?
Credit = Liability = Positive Balance (bank owes business money)
Debit = Asset = Negative Balance (overdraft) business owes the bank
What are the steps to preparing a bank reconciliation?
- compare bank GL and statement to identify what agrees and what doesn’t
- differences will either be timing or errors
- correct errors in GL
- timing differences will be noted on Bank Rec Statement
What is the layout for the GL side of setting out a bank reconciliation?
DR
Balance b/d (CR if overdraft)
correct any errors by increasing balance
CR
bank charges
DDs
bounced cheques
Balance c/d (Statement of Financial Position Figure)
What is the layout for the Bank statement side of setting out a bank reconciliation?
Balance per bank statement
plus outstanding lodgements income
(less unpresented cheques) exps
————————————————-
Balance per adjusted bank GL account
(SoFP figure)
