Theory question 104
Banking and Bank Reconciliation4. (a) What is bank reconciliation statement? (b) List four items that cause disagreement between bank statement balance and cash book balance. (c) State one purpose for bank reconciliation
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(a) A bank reconciliation statement is a statement prepared at a date to explain the difference between the bank balance in the cash book and the balance on the bank statement.
(b) Any four: unpresented cheques; uncredited lodgements; bank charges; standing orders or direct debits; direct credits (e.g. dividends received by the bank); dishonoured cheques; errors by the bank or in the cash book.
(c) Any one: to find and explain the difference between the two balances; to update the cash book with items only the bank knew about; to detect errors and fraud; to confirm the correct bank balance for the balance sheet.
Define, list four causes, and give one purpose.