Theory question 101
Banking and Bank Reconciliation(a) Describe the following: (i) Bank statement; (ii) Bank reconciliation statement.
(b) State four reasons for disagreement between a bank statement balance and cash book balance.
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(a)(i) Bank statement: a copy of the customer's account sent by the bank at intervals, showing date, details, debits (payments/withdrawals), credits (lodgements) and the running balance.
(ii) Bank reconciliation statement: a statement prepared by the account holder to explain the difference between the cash book (bank column) balance and the bank statement balance on a given date, starting from one balance and adjusting for the items that cause the difference.
(b) Any four: unpresented cheques; uncredited cheques (lodgements not yet credited); bank charges/commission; standing orders or direct debits paid by the bank; credit transfers or direct credits (e.g. dividends) received by the bank; dishonoured cheques; interest charged or allowed by the bank; errors in the cash book or by the bank.
Give one clear sentence for each item in (b).