1. Bank reconciliation Cash account is Debit in our records but Credit in banks records (as from the banks view the entity is a creditor). The bank sends the entity a summary of the transactions in the form of a bank statement, thereby allowing a comparison of records.

2. Reasons balance in bank statements does not equal cash account Timing differences –Outstanding checks –Deposits in transit New Information –Bank fees (SC), FID –Interest paid/received –NSF checks –Direct deposits Errors

3. Reconciliation process Schedule that explains the differences between bank statement balance and companys cash balance is called a bank reconciliation.

4. Balance as per bank statement: + Deposits in transit (outstanding deposit) – Outstanding checks + or – Bank errors =Adjusted cash balance: bank NB: Non of the above need to be recorded in companys records, i.e. journal entries. No Entries

5. Cash balance per ledger: + Receipts reported on bank statement but not in ledger (e.g. note receivable, direct deposit, interest) – Bank charges – NSF cheques + or – Bank errors =Adjusted balance as per ledger account NB: All of the above need to be recorded in companys records, i.e. journal entries.

6. Example You have been supplied with the following information produced by comparing the records of Oneup Limited with the most recent bank statement: adebit balance as per cash at bank account in ledger as at 30 June, $13 100.00. bcredit balance as per bank statement as at 30 June, $17 315.90. cdeposits not reflected on bank statement, $2 400.00. d unpresented cheques (outstanding cheques) 30 June, $6 285.90. eservice charge on bank statement not recorded in books, $50.00. fcheque for postage expense, $400.00, incorrectly recorded in books as $780.00. 1Prepare a bank reconciliation statement as at 30 June. 2Prepare entries in general journal form to update the records of Oneup Limited.

7. Bank Books

9. Petty cash Fund set up to handle small cash expenditures (e.g. postage and miscellaneous supplies). Avoids inconvenience and expense of writing many small cheques. Size – depends on number and amounts of minor expenditures. Can be maintained by handling the fund on an imprest basis – fund contains a fixed amount.

10. Prepare the following general journal entries for petty cash 1 Establishing a $200 fund Dr. Petty Cash$200 Cr. Cash - Bank$200 2 Replenish the fund – the following expenses had been incurred: postage $27.50, office supplies $50.80, transportation $73.40, coffee $15.90

11. Journal to replenish fund: Dr. Postage expense$27.50 Dr. Office supplies exp$50.80 Dr. Transportation exp$73.40 Dr. Miscellaneous exp$15.90 Cr. Cash-Bank $167.60

12. Journal to increase the petty cash fund up to $ 300 Dr. Petty Cash$200 Cr. Cash - Bank$200 Whereas the entry to decrease the petty cash fund: Dr. Cash-Bank$xxx Cr. Petty Cash$xxx