BOOK KEEPING FORM TWO – BANK RECONCILIATION STATEMENT

When the money is deposited by us into bank, we debit the cash book in the bank column, on the other hand, on receipt of money from the customer, the bank gives credit to the another customer a/c when money is with draw from the bank firm  gives  credit to the cash in the bank  column which bank debit the account of the customer.

DEFINITION: 

BANK  RECONCILIATION  STATEMENT – Refer to the periodical statement prepared by a trader for purpose of identify and adjusting cash balance and the bank statement.

BANK STATEMENT – Is the statement prepared by bank and sent to the customer showing  transactions  between the bank and customer for his information and verification.

OBJECTIVE OF BANK  RECONCILIATION  STATEMENT

The main objective of preparing this statement is to know what causes of difference  between cash balance and bank statement.

1.      CAUSES OF THE DIFFERENCE BETWEEN CASH AND BANK STATEMENT
UNPRESENTED CHEQUE; is the cheque issued by a business but not yet presented to the bank for payment.

2.      UNCREDITED CHEQUE; which has been deposited sent to our bank but not yet collect, not credited to customer’s book.

3.      BANK CHARGE; The bank charge their customer for the services it render to the customer for time to time by deducting the customer a/c as soon as it render such services however a customer will know such charge only when he receives a statement account from the bank.

4.      STANDING ORDER; any payment made by the bank on behalf of the business,  not recorded in the cash book.

5.      DIRECTED COLLECTION ON BEHALF OF THE CUSTOMER; a bank may received amount due to the  customer directly from customer debtors for e.g. The bank may get dividend ,rent, interest and credit.

6.      ERROR; They may be error in the account maintained by the customer as well as bank E.g. wrong debit or credit may be given a bank or customers.

 
 

TECHNIQUE OF PREPARING BANK  RECONCILIATION  STATEMENT

The following are the steps to be taken for preparing the bank reconciliation statement;

1. The cash book should be completed and balance as per the cash book column particular date should be found.

2. The bank should be requested  to complete and sent to the business bank statement.

3. The balance as shown either by cash book or bank statement should be taken as a base.

4. The effect in a particular cause if difference should be studied on the balance shown by the either book.

HOW TO RECONCILE

1.-Compare the item which appears in the debit side of the each  {bank column} with those items appearing on the credit column of the bank statement by breaking {making] item appearing in both places.

2.-Comparing also the items which appear on the credits side  of the cash book { bank column} which those item appearing in the debit column of the bank statement by taking items  appearing in the both places.

3.-Preparing bank reconciliation statement in case has resulted in an increase it can be deducted and vice versa.

                                          
 

        
 

                                       STRUCTURE OF BANK RECONCILIATION STATEMENT    

    
 

     

                                                                          
 

 
 

Example 1

From the following information prepare bank reconciliation statement as at 31^st July 2008

                               
 

                                 BANK RECONCILIATION STATEMENT AS AT 31/7/2008
  

Example.2
  

                                                               BANK STATEMENT

 
 

Solution;

                                              BANK   RECONCILIATION   STATEMENT  AS AT 30^th JUNE
  
Example.3

                           

                                                            BANK STATEMENT

      

 
 

REQUIRED; A] ADJUSTED CASH BOOK

                     B] BANK RECONCILIATION STATEMENT

 
 

Solution

DR                                             ADJUSTED CASH BOOK                                             CR

 
 

                        BANK RECONCILIATION STATEMENT AS AT 31 DEC 2009

   

EXERCISE.1

DR                                                              CASH BOOK                                                   CR

 

                                                            
                                                   BANK STATEMENT

REQUIRED:    a] Draw up adjusted cash book

                          b] Prepare bank reconciliation statement {start with the balance     as per bank statement}.

Solution;-

                  DR                                        ADJUSTED CASH BOOK                                           CR

 

                          BANK    RECONCILIATION  STATEMENT

   

 
 

AN OVERDRAFT

Is a form of loan to a customer by a bank where by a customer his allow to with draw more money than that he/she has in his  or her  account, O/D Represents over draft.

BANK RECONCILIATION AS AT……………………….

            BANK RECONCILIATION STATEMENT AS AT……………

       

            
         Example.4

                                                            BANK STATEMENT

Solution

                                                                                                                                                           

 EXERCISE;

You are given the following information of Hudhaifa & son’s LTD on march 1996

                                                           BANK STATEMENTS

 
 

 
 

Draw up a] cash book up to date

                b] Bank reconciliation statement as on 31^st   December 1996