Question 1 Introduction
When updating bank account in the cash book from the latest bank statement a business must take account of unticked items on the bank statement such as interest received from the bank, bank charges and unpresented cheques.
The purpose of a bank reconciliation statement is to agree the balance of bank account in the cash book and the final balance on the bank statement.
The only main timing difference between the balance of bank account in the cash book and the final balance on the bank statement will be that of payments made by a business which have not yet been cleared through the bank account, for example unpresented cheques.
If a cheque issued by a business has not yet been presented (cleared) through the banking system, the balance of the bank account in the cash book will be lower by the amount of the cheque than that of the bank account at the bank.
When drawing up a bank reconciliation statement, the first step is to tick off all the items which appear in both bank account in the cash book and the bank statement.
When updating bank account in the cash book from the latest bank statement a business must take account of unticked items on the bank statement such as interest received from the bank, bank charges and unpresented cheques.
Learning
resources for Accounting qualifications