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BANK RECONCILIATION

BANK RECONCILIATION. An organisation’s Bank Account balance often differs from the balance shown on the Bank Statement prepared by the bank. Why?. THINGS THE BANK MAY NOT KNOW YET. Cheques paid to creditors who may hold on to them before taking them to the bank days later

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BANK RECONCILIATION

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  1. BANK RECONCILIATION • An organisation’s Bank Account balance often differs from the balance shown on the Bank Statement prepared by the bank. • Why? UNIT 3C MY CLUB

  2. THINGS THE BANK MAY NOT KNOW YET • Cheques paid to creditors who may hold on to them before taking them to the bank days later • Deposits made into the bank on or near the date the statement is prepared ie too late to be included • If so, they will be included in the next statement UNIT 3C MY CLUB

  3. THINGS THE ORGANISATION MAY NOT KNOW YET • Standing orders and direct debits can be forgotten about but the bank always remembers them • How much Bank Charges are - until the bank tells them in the statement • Deposits made straight through the bank rather than to the organisation (BGCs) UNIT 3C MY CLUB

  4. THINGS TO REMEMBER • The Bank Statement and the Bank Account are a mirror image of each other ie payments made are recorded in the credit column of the bank account but the bank shows them in the debit column of the statement receipts are shown in the debit column of the bank account but appear in the credit column of the bank statement UNIT 3C MY CLUB

  5. HOW TO RECONCILE THE TWO • Step 1 Find the differences by ticking off all the matching items in the bank statement and bank account and circle the items for which there is no match • Step 2 Update the bank account using the circled items in the statement • Step 3 Prepare a bank reconciliation statement using the circled items in the bank account UNIT 3C MY CLUB

  6. - Finding the Differences STEP 1 BANK STATEMENT Treasurer Snappy Camera Club Date Description Dr Cr Balance 1Ap Op Bal 2860 6” Deposit 250 3110 13” 004223 600 2510 15” DD Bet Ph 60 2450 19” Deposit 20 2470 28” 004256 120 2350 30” Bank Chgs 10 2340 UNIT 3C MY CLUB

  7. - Updating the Bank Account STEP 2 30 Apr DD Better Photo 602805 30 Apr Bank Charges 10 2795 UNIT 3C MY CLUB

  8. - The Bank Reconciliation Statement STEP 3 Snappy Camera Club BANK RECONCILIATION STATEMENT AS AT 30 APRIL…. Bank Statement Balance £2340 Add Items deposited not yet shown: Subscriptions 800 3140 Less Unpresented Cheques: Secretary’s Expenses 305 Advertising 40 345 Corrected Bank Account Balance 2795 UNIT 3C MY CLUB

  9. KEY WORDS a standing order a bank giro credit a direct debit bank charges a method of payment for a regular sum to the same person, the same time every month a payment directly into your bank account similar to a standing order but the payee instructs the bank to deduct theamount from your account every month the amount you pay the bank for settingup standing orders and direct debits. UNIT 3C MY CLUB

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