FOA - BANK RECON statement - chat Nov 17

School: University of the West Indies at Mona - Course: MATH 103 - Subject: Accounting

FUNDAMENTALS OF ACCOUNTING UNIT 7 - BANK RECONCILIATION STATEMENT The bank sends its customers a bank statement at regular intervals.The bank statement is a copy of the bank's records of your account.It shows the balance at the beginning of the period, all cheques lodged to the account, all cheques withdrawn and the closing balance in the account at the end of the period. Bank Reconciliation Statement: A statement prepared by the business to make the cashbook and the bank statement balance agree. Note:The bank credits to increase an account And debit to decrease an account Factors which make the cashbook and Bank statement Balance disagree 1.Late Lodgment: These are cheques received by the business and debited to its cashbook.However, the cheques are lodged into the business bank account late, and are therefore not reflected on the bank statement. 2.Un-presented Cheques: These are cheques paid out by the business and credited to its cashbook.However, the persons (creditors) to whom the cheques were paid have not yet taken them to the bank for the money to be deducted from the business bank account. 3.Standing Order The business instructs the bank to make regular, fixed payments on its behalf. The amount for a standing order will be found in the debit column of a bank statement and must therefore be credited to the updated cashbook 4.Credit Transfer Persons who owe the business (debtors) will settle their debts by transferring the money directly into the business bank account. The amount for a credit transfer will be found in the credit column of a bank statement and must therefore be debited to the updated cashbook. 5.Direct Debit. The business permits a creditor to collect money owing to him directly from the business bank account. This service is used when the amount to be paid to the creditor varies.

This agreement must be known by the business, the creditor and the bank. Furthermore, the agreement must be documented. The amount for a direct debit will be found in the debit column of a bank statement and must therefore be credited to the updated cashbook. 6.Dis-honoured Cheque: A cheque for which the bank refuse to honour payment.The bank may refuse to pay the amount on a cheque because: -figures on the cheque do not correspond with words -the cheque requires more signature -inadequate funds in the account to cover the amount on the cheque The amount for a dis-honoured cheque will be found in the debit column of a bank statement and must therefore be credited to the updated cashbook