Bank Reconciliation Statements

Purpose of a bank reconciliation
It should be prepared regularly as part of the internal control system of the business to check:

  1. the accuracy of the cash book
  2. the accuracy of the bank statement
  3. that undue delay is not occurring between payments, receipts and their clearance by the bank
  4. to discover payments made and items received by the bank not entered in the cash book

Reasons for differences in bank statement and cash book

  1. The causes of difference will be fall into one of the following classes:
  2. Items (not consisting of errors) which appear in the bank statement but which are not in the cash book, e.g., dishonoured cheques or bills, interest and bank charges, standing order (an order made to the bank to make a regular payment), dividends or interest income credited direct to the bank  and      payments by customers which are paid direct to the bank.
  3. Items (not consisting of errors) which appear in the cash book but which do not appear in the bank statement. These are confined to outstanding cheques and outstanding deposits.
  4. Errors made in the compilation of the cash book or the bank statement.
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