Chapter 38 - Bank Accounts

Question 1

Why is it very important that we check our own bank account against the bank’s records on a regular basis?

Answer 1

To make sure they’re both the same, or if not, find out why they’re different

Question 2

Opening balance

Answer 2

Money in our account or money overdrawn (OD) at the start of a period

Question 3

Lodgements

Answer 3

Money put into our account during a period

Question 4

Withdrawals

Answer 4

Money taken out of our account during a period

Question 5

Closing balance

Answer 5

Money in our account or money overdrawn (OD) at the end of a period

Question 6

Bank Statement

Answer 6

Document sent by our financial institution that shows a record of all our bank transactions

Question 7

What information does a bank statement contain?

Answer 7

• Opening balance
• All payments made out of the account
• All lodgements into the account
• Bank’s fees
• Any interest received/paid
• Closing balance in the bank account

Question 8

Why do we often find that the balance the bank says we have, will not be be the same as the balance we think we have for the same period?

Answer 8

○Some transactions were made too late to be included in the bank statement
○Cheques paid but not yet presented
○Cheques lodged but not yet credited
○Bank charges and fees we don’t know about
○Payments made/received by DD, SO, or CT
○Mistake

Question 9

What steps are involved in reconciling our bank account with the bank statement?

Answer 9

1. Compare
2. Prepare a corrected bank account
3. Balance
4. Prepare a bank reconciliation statement
5. The two balances should be equal