Theory question 104
Banking and Bank Reconciliation(a) What is a Bank Reconciliation Statement?
(b) Explain the following terms: (i) Bank Charges (ii) Standing order (iii) Credit Transfer (iv) Dishonoured Cheque (v) Unpresented cheque (v) Uncredited Cheques
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(a) A statement prepared by an account holder at a date to explain the differences between the cash book (bank column) balance and the bank statement balance and bring them into agreement.
(b)(i) Bank charges: fees deducted by the bank for its services, often not yet in the cash book.
(ii) Standing order: a customer's instruction to the bank to pay a fixed amount to someone at regular intervals.
(iii) Credit transfer: money paid directly into the account by a third party (e.g. a debtor), shown on the statement before the cash book.
(iv) Dishonoured cheque: a cheque paid in but refused by the drawer's bank (e.g. insufficient funds) and debited back.
(v) Unpresented cheque: a cheque issued and entered in the cash book but not yet presented to the bank for payment.
(vi) Uncredited cheque: a cheque paid in and entered in the cash book but not yet credited by the bank.
Define the statement and give one clear line per term.