Bank Reconciliation

Bank statement

Document produced by the bank which shows the cash held by a business with the bank. It lists the deposits, withdrawals and balance of the business's bank account over a stated time period usually one month.

Bank reconciliation statement

This document brings into agreement the balance of the business's bank account with the bank's records of the business's account, after all outstanding transactions have been taken into consideration.

Night safe deposits

Deposits made by the business at night to the bank. These items are usually not recorded by the bank at the end of the month.

Unpresented cheques

Cheques which have been drawn on the business's account but which have not yet been presented at the bank for payment. The bank statement shows only those cheques it has honoured (ie paid).

EFT items

Electronic funds transfers may be received or paid electronically (directly) into or out of the business's bank account.

Direct deposits

The business can authorise the bank to accept deposits on its behalf. Only whent the bank statement is issued does the business receive confirmation of the increase in its deposits. Rent Revenue is commonly deposited directly inot the business's bank acco

Bank charges

When the bank has transactions with the business, various bank fees can apply. These include fees for account keeping, merchant services (bankcard/visa transactions) and fees for the use of EFTPOS facilities. These are shown in the bank statement in the d

Interest revenue

Interest earned by the business for money invested in the bank. Usually earned through a cash management account or term deposits. This is shown in the bank statement in the credit column.

Dishonoured cheques

These are cheques that have been deposited by the business into its bank account and recorded through the CRJ as a deposit. However, due to insufficient funds in the customer's bank account these cheques are returned to the business without the funds bein

Business errors

These are errors made by the business in recording its receipts or payments in the Cash Receipts Journal or the Cash Payments Journal. These errors are corrected by reversing the incorrect amount and re-entering the correct entry into the appropriate jour

Bank errors

These are errors made by the bank and can include overcharging of fees, entering incorrect amounts for deposits or cheques. The bank needs to be notified of these errors and an adjustment made in the Bank Reconciliation Statement until the error has been

Overdraft

When the business's bank statement shows a Debit balance. This means the business is now an asset to the bank because it owes the bank back the money it has overdrawn its account by.

Credit

When the business has money in the bank the bank statement will show this balance state.

Final balance

When preparing the bank reconciliation statement this figure from the bank statement is used as the first entry.

Added

If the bank statement shows an overdraft then this will be done with unpresented cheques in the bank reconciliation statement.

Subtracted

If the bank statement shows an overdraft then this will be done with deposits not yet credited in the bank reconciliation statement.

Bank account

The final balance in the bank reconciliation statement should match this figure in the business's records.

Asset

From the business's point of view money in the bank represents this.

Liability

From the bank's point of view money the business has in the bank represents this.

Credit column

Deposits recorded in the cash receipts journal are checked with this column in the bank statement.

Debit column

Cheques recorded in the cash payments journal are checked with this column in the bank statement.

Current bank statement

The previous bank reconciliation statement should be checked with this record at the beginning of the bank reconciliation process.

Current bank reconciliation statement

Circled amounts in the previous bank reconciliation statement are entered into this document at the end of the bank reconciliation process.

Bank reconciliation process

The process used to check if the business's records and the bank's records are in agreement given all the outstanding amounts. It involves checking the cash journals of the business with the bank statement every month and recognising differences. A bank r