Podcast
Questions and Answers
When preparing a bank reconciliation statement starting with the updated cash book balance, how are unpresented cheques treated?
When preparing a bank reconciliation statement starting with the updated cash book balance, how are unpresented cheques treated?
- Deducted from the updated cash book balance.
- Added to the updated cash book balance. (correct)
- Added to the balance as per the bank statement.
- Subtracted from the balance as per the bank statement.
When reconciling from the bank statement balance, how are late lodgements (deposits in transit) typically handled?
When reconciling from the bank statement balance, how are late lodgements (deposits in transit) typically handled?
- Ignored, as they will appear on the next bank statement.
- Subtracted from the bank statement balance.
- Added to the bank statement balance. (correct)
- Added to the updated cash book balance.
A company's cash book shows a credit balance. What does this typically indicate?
A company's cash book shows a credit balance. What does this typically indicate?
- A deposit in transit.
- A favourable cash balance.
- An error in the cash book.
- A bank overdraft. (correct)
How is a bank overdraft typically indicated on a bank statement?
How is a bank overdraft typically indicated on a bank statement?
Which of the following represents the correct order of adjustments when starting with the bank statement balance to arrive to the updated cash book balance?
Which of the following represents the correct order of adjustments when starting with the bank statement balance to arrive to the updated cash book balance?
Why do adjustments for bank reconciliations differ when dealing with a bank overdraft compared to a debit balance?
Why do adjustments for bank reconciliations differ when dealing with a bank overdraft compared to a debit balance?
What is the primary reason for preparing a bank reconciliation statement?
What is the primary reason for preparing a bank reconciliation statement?
A bank reconciliation statement is prepared on December 31, 2024. A deposit of $500 made on December 30, 2024, did not appear on the bank statement. How should this item be treated in the bank reconciliation?
A bank reconciliation statement is prepared on December 31, 2024. A deposit of $500 made on December 30, 2024, did not appear on the bank statement. How should this item be treated in the bank reconciliation?
What is the primary purpose of preparing a bank reconciliation statement?
What is the primary purpose of preparing a bank reconciliation statement?
Which of the following items would typically appear on a bank statement but NOT initially in the cash book, requiring an update to the cash book?
Which of the following items would typically appear on a bank statement but NOT initially in the cash book, requiring an update to the cash book?
A company deposits a cheque, but it is later returned due to insufficient funds in the payer's account. How is this item typically referred to in the context of bank reconciliations?
A company deposits a cheque, but it is later returned due to insufficient funds in the payer's account. How is this item typically referred to in the context of bank reconciliations?
Which of the following describes an 'unpresented cheque' in the context of a bank reconciliation?
Which of the following describes an 'unpresented cheque' in the context of a bank reconciliation?
A business uses a 'standing order' to pay its monthly rent. How does this transaction typically appear in the bank reconciliation process?
A business uses a 'standing order' to pay its monthly rent. How does this transaction typically appear in the bank reconciliation process?
What is the correct procedure for dealing with items found in the cash book but not yet on the bank statement when preparing a bank reconciliation?
What is the correct procedure for dealing with items found in the cash book but not yet on the bank statement when preparing a bank reconciliation?
A company discovers an error in its cash book where a payment of $567 was recorded as $576. How should this error be corrected during bank reconciliation?
A company discovers an error in its cash book where a payment of $567 was recorded as $576. How should this error be corrected during bank reconciliation?
A company receives a notification from its bank about an interest payment credited to its account. In which document should this information be first recorded?
A company receives a notification from its bank about an interest payment credited to its account. In which document should this information be first recorded?
Flashcards
Bank Reconciliation Statement
Bank Reconciliation Statement
A statement comparing the cashbook balance with the bank statement balance.
Bank Statements
Bank Statements
Copies issued by a bank detailing money paid into and out of an account.
Bank Charges
Bank Charges
Fees charged by the bank for account-related services.
Credit Transfer (Bank Giro)
Credit Transfer (Bank Giro)
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Standing Order
Standing Order
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Direct Debit
Direct Debit
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Dishonoured Cheques/Returned Cheques
Dishonoured Cheques/Returned Cheques
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Unpresented Cheques/Outstanding Cheque
Unpresented Cheques/Outstanding Cheque
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Unpresented Cheque
Unpresented Cheque
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Late Lodgements
Late Lodgements
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Updated Cash Book Balance
Updated Cash Book Balance
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Bank Statement Balance
Bank Statement Balance
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Bank Overdraft
Bank Overdraft
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Overdraft Characteristics
Overdraft Characteristics
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Bank Overdraft Indicator
Bank Overdraft Indicator
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Study Notes
- Bank Reconciliation Statement compares the cashbook balance and the bank statement balance.
- Bank reconciliation proves that differences between cashbook and bank statement balances can be reconciled.
Definition of Bank Statements
- Banks issue copies of bank statements to customers, detailing money paid in and out.
- Serves as a copy of the account, showing transactions.
Items on the Bank Statement but not in the Cash Book
- Bank charges are fees for operating the account.
- Credit transfer (Bank Giro) is a method businesses use to pay creditors, wages, and salaries.
- Standing order involves instructions to a bank to pay specified amounts at specific dates.
- Direct Debits gives permission to organizations to collect amounts owed directly.
- Interest received is when the bank pays interest to the account holder.
- Dishonoured Cheques/Returned cheques are worthless cheques due to insufficient funds or signature issues.
- Errors are mistakes in calculations or entries.
Items in the Cash Book but not on the Bank Statement
- Uncredited Cheques/Late lodgement/Unrecorded deposit are Cheques banked but not acknowledged on the current bank statement.
- Unpresented cheques/Outstanding Cheque is a cheque paid but not yet processed by the banking system.
Steps to prepare reconciliation statement
- Compare the bank statement with the cashbook.
- Identify entries not common to both.
- Update the cashbook with items from the bank statement but not in the cashbook like standing orders, credit transfers, and bank charges.
- Reconcile the updated cashbook balance with the bank statement balance, using items in the cashbook but not on the bank statement.
Bank Overdrafts
- A bank overdraft is a facility allowing continued payments despite insufficient funds, functioning as a short-term loan with daily interest.
- Adjustments for reconciliation are opposite for credit balance overdrafts versus debit balances.
- Overdrafts on bank statements are marked with "O/D" or "Dr" following the amount.
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Description
Bank Reconciliation Statement compares cashbook balance and bank statement balance. It proves that differences between cashbook and bank statement balances can be reconciled. Bank statements are copies issued to customers, detailing money paid in and out.
