Procedure For Bank Reconciliation

Procedure for bank reconciliation The procedure may be summarized as follows – 1. Compare the bank statement with the bank account in the cash book. Remember to compare the debit of the bank account against he credit of the bank statement, and the credit of the bank account against he debit of the bank statement, Place a tick against those items which appear in the both records . 2. Bring the bank account in the cash book up to date by entering any items which appear on the bank statement but which have not yet been entered in the bank account. Such items may be – (a) Items debited on the bank statement, e.g. bank charges , standing orders paid ,etc . These should be credited in the bank account in the cash book (b) Items credited on the bank statement, e.g. credit transfers and standing orders paid directly into the bank. These should bed debited in the bank account in the cash book. 3. Correct any errors in the cash book 4. Balance the cash book. The balance on the bank account is now the true bank balance of the business and this figure will be shown in the balance sheet 5. Prepare the ban reconciliation statement. (a) Start with the balance shown on the bank statement. (b) Add on any items that have been debited in the cash book but not yet credit on the bank statement. i.e. amounts not yet credited (c) Deduct any items that have been credited in the cash book but not yet debited on the bank statement, i.e . cheques not yet presented (d) Make any necessary adjustments for bank errors. Add back any amounts debited in error by the bank and deduct any amounts credited in error by the bank (e) the resulting figure should equal the updated bank balance shown in the cash book

The bank reconciliation could, alternatively, begin with the updated cash book balance and end with eh bank statement balance. Where is done, it is necessary to reverse the entries described above, i. e. Add instead of deduct and vice versa