Bank Reconciliation 🏦

This is the statement prepared by a business to verify the cash book balance with the bank statement balance. Both bank accounts in the cash book and the bank keep the same record except that entries are shown on opposite sides. For instance, debits in the cash book appear as credits in the bank account and vice versa. Ideally, the balances should be the same, but due to certain factors, they often differ. Some common factors include:

• Cheques entered in the cash book but not yet appearing on the bank statement. 💳
• Items that appear on the bank statement but have not yet been recorded in the cash book. 📄

The bank reconciliation statement should be prepared periodically to verify the two balances. 📅

Example 📊

SKM’s cash book at 31st December 2011 showed a debit balance at the bank of K1,024,000, but the bank statement for the same date had a credit balance of K262,000. After comparing the cash book with the bank statement, the following differences were noted:

• An amount of K142,000 paid into the bank had not yet appeared on the statement. ⏳
• Bank interest of K60,000 related to an earlier overdraft had been charged by the bank. 💰
• Cheques issued for K560,000 had not been presented for payment. 📜
• A cheque for K800,000 deposited in the bank was returned unpaid due to insufficient funds. No action had been taken by SKM to address this. ❌
• Funds of K1,120,000 paid into the bank were recorded as K1,000,000 in the cash book. 🔄
• A banker’s order for K480,000 for insurance had been received by the bank but not recorded by SKM. 📑
• The bank received a direct credit transfer of K40,000 due to SKM from JKK. 💵

Solution 📝

You are required to:

• a) Update the Cash Book. 📖
• b) Prepare a Bank Reconciliation Statement as of 31 December 2011. 📊

Cash Book (Bank Column) 💼

Bank Reconciliation Statement 📋

• Balance as per Revised Cash Book: (K156,000)
• Add: Unpresented Cheques: K560,000
• Balance: K404,000
• Less: Uncredited Cheques: K142,000
• Balance as per Bank Statement: K262,000

Examination Practice 📚

The following are extracts from the cash book and the bank statement of Mpombo. You are required to:

• a) Write the cash book up to date and state the new balance as on 31st December 2014. 🗓️
• b) Draw up a bank reconciliation statement as on 31st December 2014. 📝

Cash Book

Bank Statement

SKM’s Cash Book for May 2010

Bank Statement for May 2010

Examination Practice

The following are extracts from the cash book and the bank statement of Mpombo. You are required to:

• a) Write the cash book up to date and state the new balance as on 31st December 2014.
• b) Draw up a bank reconciliation statement as on 31st December 2014.

Cash Book

Bank Statement 🏦

SKM’s Cash Book for May 2010 💼

Bank Statement for May 2010 🏦