Chapter 12

Question 1

Bank Reconciliation

Answer 1

Checking that the cash book and bank statements match on a regular basis

Question 2

Differences where adjustments need to be made into the cash book

Answer 2

Cash book errors
Standing orders / direct debits not recorded in the cash book
Bank charges / interest not recorded in the cash book
Dishonoured cheques not written off in cash book

Question 3

Unpresented cheque

Answer 3

A cheque written by the business not yet paid into the bank of the supplier

Question 4

Uncleared lodgement

Answer 4

A cheque received by the business not yet credited into their bank account

Question 5

Bank error

Answer 5

Remains as a difference until the bank corrects the error

Question 6

Debits and credits for banks

Answer 6

Opposite to normal - think from the banks perspective

E.g. bank overdraft is normally a credit but to the bank it’s a debit and cash for a business is a debit but for the bank it’s a credit

Question 7

Bank reconciliation process

Answer 7

1. Tick off all transactions that are in the cash book and the bank statement
2. If there is a difference in balance b/f check if there is an unpresented cheque or uncleared lodgement in the cash book or bank statement
3. Add missing items to the bank statement and cash book
4. Close the cash book and bank statement