Podcast
Questions and Answers
When preparing a bank reconciliation starting with the updated cash book balance, how are unpresented checks typically treated?
When preparing a bank reconciliation starting with the updated cash book balance, how are unpresented checks typically treated?
- Added to the cash book balance.
- Added to the bank statement balance. (correct)
- Subtracted from the cash book balance.
- Subtracted from the bank statement balance.
When preparing a bank reconciliation starting with the balance as per the bank statement, how are late lodgements treated?
When preparing a bank reconciliation starting with the balance as per the bank statement, how are late lodgements treated?
- Added to the bank statement balance. (correct)
- Added to the updated cash book balance.
- Subtracted from the bank statement balance.
- Subtracted from the updated cash book balance.
What does 'O/D' typically indicate on a bank statement?
What does 'O/D' typically indicate on a bank statement?
- Official Document.
- Outstanding Deposit.
- Over Draft. (correct)
- Order Details.
If a bank statement shows a 'Dr' after an amount, what does this usually indicate?
If a bank statement shows a 'Dr' after an amount, what does this usually indicate?
How does the treatment of adjustments in a bank reconciliation change when dealing with a bank overdraft (credit balance in the cash book) compared to a debit balance?
How does the treatment of adjustments in a bank reconciliation change when dealing with a bank overdraft (credit balance in the cash book) compared to a debit balance?
Which of the following best describes a bank overdraft?
Which of the following best describes a bank overdraft?
A company has an updated cash book balance of $10,000. There are unpresented checks totaling $1,500 and late lodgements of $800. If preparing a bank reconciliation statement starting with the updated cash book balance, what is the adjusted bank statement balance?
A company has an updated cash book balance of $10,000. There are unpresented checks totaling $1,500 and late lodgements of $800. If preparing a bank reconciliation statement starting with the updated cash book balance, what is the adjusted bank statement balance?
A bank statement shows a balance of $5,000. There is a late lodgement of $700 and unpresented cheques of $1,000. If preparing a bank reconciliation statement starting with the bank statement balance, what is the updated cash book balance?
A bank statement shows a balance of $5,000. There is a late lodgement of $700 and unpresented cheques of $1,000. If preparing a bank reconciliation statement starting with the bank statement balance, what is the updated cash book balance?
Which of the following best explains the primary purpose of preparing a bank reconciliation statement?
Which of the following best explains the primary purpose of preparing a bank reconciliation statement?
A company discovers that a supplier's cheque, written and mailed last month, has not yet been cashed by the supplier. How should this 'unpresented cheque' be treated on the bank reconciliation?
A company discovers that a supplier's cheque, written and mailed last month, has not yet been cashed by the supplier. How should this 'unpresented cheque' be treated on the bank reconciliation?
A company's bank statement includes a bank charge for account maintenance that the company was not previously aware of. How should this item be handled when performing a bank reconciliation?
A company's bank statement includes a bank charge for account maintenance that the company was not previously aware of. How should this item be handled when performing a bank reconciliation?
Which of the following items would require an adjustment to the cash book balance in a bank reconciliation?
Which of the following items would require an adjustment to the cash book balance in a bank reconciliation?
What is the term used for payments made directly from a business's bank account to a third party, authorized by the business in advance, often used for recurring bills?
What is the term used for payments made directly from a business's bank account to a third party, authorized by the business in advance, often used for recurring bills?
A cheque deposited by your company is returned by the bank marked 'NSF'. What does 'NSF' stand for, and how does this affect the bank reconciliation?
A cheque deposited by your company is returned by the bank marked 'NSF'. What does 'NSF' stand for, and how does this affect the bank reconciliation?
When comparing the cash book to the bank statement, you notice that a deposit made on the last day of the month does not appear on the bank statement. This is most likely due to:
When comparing the cash book to the bank statement, you notice that a deposit made on the last day of the month does not appear on the bank statement. This is most likely due to:
Which of the following is an example of a credit transfer (bank giro) that would appear on a bank statement but not initially in the cash book?
Which of the following is an example of a credit transfer (bank giro) that would appear on a bank statement but not initially in the cash book?
Flashcards
Bank Reconciliation Statement
Bank Reconciliation Statement
A statement that compares the cashbook balance with the bank statement balance.
Purpose of Bank Reconciliation
Purpose of Bank Reconciliation
To prove that differences between cashbook and bank statement balances can be explained and reconciled.
Bank Statement
Bank Statement
A record from the bank detailing money going in (deposits) and out (withdrawals) of an account.
Bank Charges
Bank Charges
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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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Uncredited Cheques/Late lodgement/Unrecorded deposit
Uncredited Cheques/Late lodgement/Unrecorded deposit
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Unpresented Cheques
Unpresented Cheques
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Late Lodgements
Late Lodgements
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Reconciliation: Cash Book First
Reconciliation: Cash Book First
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Reconciliation: Bank First
Reconciliation: Bank First
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Bank Overdraft
Bank Overdraft
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Overdraft Interest
Overdraft Interest
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Overdraft Adjustments
Overdraft Adjustments
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Study Notes
- A bank reconciliation statement compares the cashbook balance to the bank statement balance.
- Bank reconciliation proves that the cashbook and bank statement balances can be reconciled even if they are different.
- Bank statements contain records of money paid into and out of an account.
- Bank statements are copies issued by a bank to a customer.
Items on Bank Statement but not in Cash Book
- Bank charges are fees charged by the bank for operating an account.
- Credit transfer (Bank Giro) is a method businesses use to pay creditors, wages, and salaries through the banking system.
- Standing orders are instructions to a bank to pay specified amounts at specific dates.
- Direct debits involve a business giving permission for an organization to collect amounts from their bank account to pay mortgages, insurance premiums, credit cards, and utility bills.
- Interest received is when the bank pays interest on an account to the account holder.
- Dishonored/Returned checks are deposited checks that are worthless due to insufficient funds or signature issues.
- Errors include mistakes in calculations or entries.
Items in Cash Book but not on Bank Statement
- Uncredited checks/Late lodgement/Unrecorded deposit are checks banked but not acknowledged on the current month's bank statement.
- Unpresented/Outstanding checks are checks paid to a worker or supplier but not yet processed by the banking system.
Steps to Prepare a Bank Reconciliation Statement
- Compare the bank statement with the cashbook.
- Identify entries not common to both.
- Update the cashbook using items on 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 allows payments from a current account even with insufficient funds.
- An overdraft is a short-term loan that incurs daily interest.
- Adjustments for reconciliation are opposite for a bank overdraft compared to a debit balance in the cash book.
- Bank statements show an overdraft with "O/D" or "Dr" after the amount.
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