By S.K Chik

Introduction At each given date, our banker should send us a statement which shows the details of our bank transactions during a particular period and the balance at that date. We call this statement the “bank statement”

Theoretically, our company’s bank account in the cash book column should have the same transactions and balance as recorded by the bank statement. The only difference is that the former is prepared by our firm while the latter is done by the banker However, in practice, the balance from the bank statement seldom agrees with the balance from the bank account in the cash book.

Reasons for differences 1.Bank interest and commission The banker calculates these charges, the amount will first appear on the bank statement and cannot be entered into the cash book until the statement is received. 2.Uncredited Cheques Some cheques that we have received but not yet deposited or deposited but not yet credited on the bank statement because the cheques have not been ”cleared”

3. Unpresented Cheques Cheques issued sent to creditors have been recorded in the cash book but they have not been presented to the bank for payment, so the corresponding entry in the bank statement may not appear until several days later. 4. Autopay – Standing Orders and Direct debits The banker pays regular amounts on behalf of our company, this amount paid will first appear on the bank statement at the appropriate date, but may not have been entered in the cash book. 5.Credit transfer Sometimes debtors may not send us the cheques for settlement but directly deposit money into our bank account. (e.g. EPS) This amount received will first appear on the bank statement and cannot be entered into the cash book until the bank statement is received.

6. Dishonored/ Returned Cheques 7. Errors made by the banker or by the company

Adjustments We should adjust the balance of cash book in order to agree the balance of bank statement The difference that cash book has not been entered the transactions of Bank interest, Standing orders, Direct debits, Credit transfer and dishonored Cheques should be adjusted in Cash book

ITEMS ENTRIES ALREADY MADE ON CORRECTION REQUIRED ON CASH BOOK CASH BOOKBANK STATEMENT 1. Unpresented Cheque CreditedNot yet entered None 2. Uncredited cheque DebitedNot yet entered None 3. Credit transfer Not yet entered Crediteddebit 4. Standing Order Not yet entered DebitedCredit 5. Bank Charges Not yet entered DebitedCredit 6. Dishonored cheque DebitedreturnedCredit

20X6 $ Jan 30 Mr. A Bal c/ d X6 $ Jan 25 Balance b/ f Sales Sales Feb 1 Balance b/ d 700 Cash Book (Bank) Date 20X6 Jan Particulars Balance b/ f Cheque #901 Cash deposit (sales) Cash deposit (Mr. B) Standing order - rent Withdrawals (Dr.) $ Deposits (Cr.) $ Balance $ 130 (Cr.) 100 (Cr.) 120 (Cr.) 270 (Cr.) 230 (Cr.) Hong Kong Bank LTD. Gradeplus Co. Bank Statement

20X6 $ Jan 30 Mr. A Bal c/ d X6 $ Jan 25 Balance b/ f Sales Sales Feb 1 Balance b/ d 700 Cash Book (Bank) Date 20X6 Jan Particulars Balance b/ f Cheque #901 Cash deposit (sales) Cash deposit (Mr. B) Standing order - rent Withdrawals (Dr.) $ Deposits (Cr.) $ Balance $ 130 (Cr.) 100 (Cr.) 120 (Cr.) 270 (Cr.) 230 (Cr.) Hong Kong Bank LTD. Gradeplus Co. Bank Statement Unpresented Cheque (adjusted) Overstate d $180 Unpresented Cheque   Credit transfer Uncredited Cheque Standing Order Understated balance of $50

20X6 $ Jan 31 Standing Order Bal c/ d X6 $ Jan 31 Balance b/ f Credit transfer Understated balance Feb 1 Balance b/ d 860 Cash Book (Bank) Adjustments

Bank Reconciliation Statement Balance as per cash book Add: Unpresented Cheque Less: Uncredited Cheque Bank error (understated deposit) Balance as per bank statement $ $ (680) 230 Bank Reconciliation Statement as at 31 January 20X6

Balance as per bank statement Add: Uncredited Cheque Bank error (understated deposit) Less: Unpresenited Cheque Balance as per Cash Book $ $ (50) 860 Bank Reconciliation Statement as at 31 January 20X6 Instead of commencing with the cash book balance, the bank reconciliation statement can commence with the bank statement balance and end with cash book balance as follows:

At the close of business on 28 February 19X9 the cash book of Mr. Chong showed a balance of $625 in his bank. The figure differed from the bank balance as shown on his bank statement. The following matters account for the difference: (a)On 28 February 19X9 one of his debtors had paid direct to Mr. Chong’s banking account the sum of $42. This transaction had not been entered in the cash book. (b)During February 19X9 the bank had allowed Mr. Chong interest amounting to $54 but this had not yet appeared in the cash book. (c)Certain cheques drawn by Mr. Chong during February 19X9 had not been presented for payment by the close of business on 28 February 19X9. These were for $21, $17. $57 and $61. (d)A standing order for $75 being one quarter’s rent had been paid by the bank on Mr. Chong’s behalf but this had not yet been entered in the cash book. (e)During February 19X9, Mr. Chong had paid into his banking account a cheque for $44 which he had received from a debtor’s bank. The appropriate entry appeared on the bank statement but not in Mr. Chong’s cash book. Example:

Write up the cash book starting with balance of $625 and draw up the bank statement but not in Mr. Chong’s cash book. Required: