Topic 10: Bank reconciliation

Question 1

1. Explain why a Bank Reconciliation Statement is prepared.

Answer 1

A Bank Reconciliation Statement is prepared to account for the differences between the balance in the Cash Book and the balance in the Bank Statement.

Question 2

2. Explain why the balance in the Cash Book can be different from the balance in the Bank Statement.

Answer 2

● A difference in the time of recording certain transactions can cause discrepancies between the Cash Book and the Bank Statement.

● The difference could also be due to any error in recording by either the business or the bank.

Question 3

3. Explain why a credit balance in the Bank Statement is shown as a debit balance in the Cash Book of a business.

Answer 3

In the business’ Cash Book, receipts of cash or cheques are recorded as debits because they are regarded as business assets. The bank records such deposits as credits in the Bank Statement to reflect them as liabilities because the funds belong to the business and not the bank.

Question 4

4. Define Uncredited cheques

Answer 4

Cheques received by the business are still being processed by the bank, thus not yet recorded in the bank statement.

Question 5

5. Define Unpresented cheques

Answer 5

Cheques given out by business but not yet presented at bank for payment.