Cash at Bank & Cash at Hand

Question 1

Possible Reasons for Dishonoured Cheques

Answer 1

• Amount in numbers is different from the amount written in words
• The date written on the cheque is more than 6 months from the date it is presented for payment.
• The payer’s acount balance is insufficient to cover the cheque amount

Question 2

Uses of Bank Reconciliation

Answer 2

• The bank reconciliation will highlight any discrepancies between the bank’s and the firm’s records of cash transactions. This allows errors to be detected and corrected.
• It ensures that the difference in the cash at bank balance and bank statement balance is only due to timing difference in the recording of transactions by the firm and by the bank and not errors.
• If the reconciliation is prepared by somebody other than the cashier, the risk of fraud or embezzlement of funds is reduced as investigation can be carried out on the long outsatnding items.
• It revelas the correct amount of cash in the bank and ensures that the correct balance is shown in the balance sheet.

Question 3

What is on Left Side of Bank Recon?

Answer 3

• From Bank’s Records
• Bank Statement balance is from Bank Statement
• If Bank Statement balance is Credit, its a +ve value
• Look at what’s missing from Company’s Cash at Bank Statement
• Items found on this side is usually Deposits in Transit and Outstanding Cheques

Question 4

What is on Right Side of Bank Recon?

Answer 4

• From Business Records
• Items missing can be found on Bank Statement
• The Cash at Bank balance is from Company’s Cash at Bank.
• If the balance is Debit, it is a +ve value
• Items usually missing are Direct Credit, Dishonoured Cheques, Standing Order, Direct Debits

Question 5

What is Outstanding Cheques?

Answer 5

These are cheques issued by the business in payment expenses, liabilities, etc, but which, the payee has not presented to the bank for payment.

Question 6

What is Outstanding Deposits?

Answer 6

• These are usually cheques received by the business, recorded into the business cash at bank account, but not recorded by the bank.

Question 7

What is a Bank Recon Statement?

Answer 7

It is a statement made out by a business to show that the bank’s records and its own cash records agree even though the figures may be different

Question 8

What is Dishonoured Cheques?

Answer 8

This occurs when the drawer’s bank refuses to pay the payee for varying reasons. In other words, the bank has failed to honour the cheque.