BANK RECONCILIATION

1
BANK RECONCILIATION

• An organisations Bank Account balance often
  differs from the balance shown on the Bank
  Statement prepared by the bank.
• Why?

2
THINGS THE BANK MAY NOT KNOW YET

• Cheques paid to creditors who may hold on to them
  before taking them to the bank days later
• Deposits made into the bank on or near the date
  the statement is prepared ie too late to be
  included
• If so, they will be included in the next
  statement

3
THINGS THE ORGANISATION MAY NOT KNOW YET

• Standing orders and direct debits can be
  forgotten about but the bank always remembers
  them
• How much Bank Charges are - until the bank tells
  them in the statement
• Deposits made straight through the bank rather
  than to the organisation (BGCs)

4
THINGS TO REMEMBER

• The Bank Statement and the Bank Account are a
  mirror image of each other
• ie payments made are recorded in the credit
  column of the bank account but the bank shows
  them in the debit column of the statement
• receipts are shown in the debit column of the
  bank account but appear in the credit column of
  the bank statement

5
HOW TO RECONCILE THE TWO

• Step 1
• Find the differences by ticking off all the
  matching items in the bank statement and bank
  account and circle the items for which there is
  no match
• Step 2
• Update the bank account using the circled items
  in the statement
• Step 3
• Prepare a bank reconciliation statement using
  the circled items in the bank account

6
STEP 1
- Finding the Differences
BANK STATEMENT Treasurer Snappy Camera Club Date
Description Dr Cr Balance 1Ap Op Bal
2860 6 Deposit 250 3110 13 004223
600 2510 15 DD Bet Ph 60
2450 19 Deposit 20
2470 28 004256 120 2350 30
Bank Chgs 10 2340
7
STEP 2
- Updating the Bank Account
30 Apr DD Better Photo 60
2805
30 Apr Bank Charges
10 2795
8
STEP 3
- The Bank Reconciliation Statement

• Snappy Camera Club
• BANK RECONCILIATION STATEMENT AS AT 30 APRIL.
• Bank Statement Balance 2340
• Add Items deposited not yet shown
• Subscriptions 800
• 3140
• Less Unpresented Cheques
• Secretarys Expenses 305
• Advertising 40 345
• Corrected Bank Account Balance 2795

9
KEY WORDS a standing order a bank giro
credit a direct debit bank charges
a method of payment for a regular sum to the same
person, the same time every month
a payment directly into your bank account
similar to a standing order but the payee
instructs the bank to deduct the amount from
your account every month
the amount you pay the bank for setting
up standing orders and direct debits.