FINANCIAL ACC 101

BANK RECONCILIATION STATEMENT

Hello Readers, Happy Wednesday to you all. How has your week been so far? It is well with all of you in Jesus name-Amen. Today you will hear Good news in Jesus name-Amen. Okay, so let's get started on our topic for today....

Bank Statement is a book prepared periodically and sent by a Bank to its Account holders, showing the transactions between the customer and the bank within a period of time. It shows a summary of the interactions between the Bank, its customer (the account holder) and others- it can be sent monthly or yearly or on any other agreed period to the customer.

Purpose of Bank Statement:

1. To inform the Customer of the transaction that takes place.

2. It helps the customer to know the position of his finance with the Bank.

3. It helps to provide customers with a continuous and permanent record of his account.

Bank Reconciliation Statement can be defined as a statement that is prepared to reconcile the disagreement of the cashbook and that of the bank statement. This is needed when a customer is dissatisfied with the bank statement sent by his/her bank and therefore wants to

reconcile it using his/her personal cashbook. In other words, It is a Statement that is prepared by an account holder for the purpose of finding out the differences between the cash book and the bank statement, in order to reconcile the balance.

Reasons for Disagreement:

The timing and information differences which can cause disagreement are:

a. Unpresented Cheque- are Cheques released or issued out to people, but which are yet to be presented to the Bank for the Bank for the Collection as of the Reconciliation date, here Cheques issued have being deducted from the Cash book but not yet presented at the Bank.

b. Discredited Cheque- are Cheques received and entered on the debit side of the Cash book but have not been entered in the Bank Statement due to the lateness or the Bank Statement has been prepared before the Cheque was paid in.

c. Dishonoured Cheque- are Cheques received by a Customer deposited into a Bank but were rejected by a Bank as a result of wrong signature, incorrect account etc.

d. Bank Charges and Interest- are Charges paid by the Customer to his/her Bank for services rendered to him by the Bank. The Bank will deduct the charges without informing the firm until they receive the Bank Statement.

e. Standing Order- is an Instruction given by the Account holder to the Bank, to make regular payment on his/her behalf.

f. Credit Transfer- are Payments made by the customers of their firm directly into their account in the Bank without awareness of the firm.

g. Dividend- is a part of the profit distributed to shareholders of an Organisation.

h. Direct Debit- occurs when a creditor is authorised to ask payment from the customer's Bank.

i. Bank Errors- occurs in the Bank during posting of items in different accounts, transposition of figures, wrong subtractions and addition of figures in the Bank Statement.

j. Under casting and Over casting of Cash Balance.

There are two Methods of Preparing this Account. Method A & Method B.

ILLUSTRATION OF METHOD A:

On 31st March 1990, Ogundele's Cash book showed a debit balance of N2, 000. His Bank Statement showed a balance of N2, 270. On comparison, the following were found.

a. Cheques drawn amounting to N1, 500 had not been presented for payment.

b. A Standing Order of N600 to a club was not taken into consideration.

c. Bank Charges of N50 were entered in the Bank Statement only.

d. A Dividend of N300 was paid directly into the Bank and not recorded in the Cash book.

e. Cheques for N1, 000 were entered into the cash book and paid to the Bank but had not been cleared and thus not credited.

f. A Customer Bolaji, paid N120 directly into the Bank without notifying the firm.

SOLUTION:

Bank Reconciliation Statement as at 31st March, 1990
	N	N
Balance as per Cash book		2, 000
Add: Unpresented Cheque	1, 500
Dividends	300
Credit Transfers	120	1, 920
		3, 920
Less: Uncredited Cheque	1, 000
Standing Order	600
Bank Charges	50	1, 650
Balance as per Bank Statement		2, 270

OR

Bank Reconciliation Statement as at 31st March, 1990
	N	N
Balance as per Bank Statement		2, 270
Add: Uncredited Cheque	1, 000
Standing Order	600
Bank Charges	50	1, 650
		3, 920
Less: Unpresented Cheque	1, 500
Dividend	300
Credit Transfer	120	1, 920
Balance as per Cash book		2, 000

NOTE: PARTS OF THIS POST WERE CULLED FROM TONAD ESSENTIAL FINANCIAL ACCOUNTING FOR SENIOR SECONDARY SCHOOLS BY O.A LONGE & R.A KAZEEM.  WE AT EDU-MADE-EASY RESPECT THIS CRAFT TOO MUCH TO DENY ITS ORIGIN. THANK YOU.

This brings us to the end of today's session, we will continue with Method B in our next Session. Hope this was very helpful to you, leave a comment of what you think of this tutorial and of your questions below. Have a Blessed Day and Remember You are Amazing. God Bless.