Objectives: At the end of this tutorial students should be able to do the following:
Definition of bank reconciliation:
Bank reconciliation is the process of updating the bank balance in a company’s cashbook and then reconciling it to the balance on the company’s bank statement.
Bank reconciliation is necessary for the following reasons:
The bank balance in the cashbook may differ from that of the bank statement because of timing differences. Timing differences occur when a transaction is recorded in either the cash book or on the bank statement, but not in both at the point in time when the bank statement is generated. Some of the factors that may cause timing differences include:
Steps to follow to when reconciling the bank account:
Below is a generic format used for bank reconciliation:
Summary of bank reconciliation steps:
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The author holds a Bsc (Hons) Degree in Applied Accounting from Oxford Brookes University, England and enjoys a successful career as an Accounting Supervisor and a private tutor.