BANK

RECONCILIATION

Chapter 7
THE BUSINESS VS THE BANK

• The business
• Money received is recorded in the cash receipts journal (CRJ)
• Money paid out is recorded in the cash payments journal (CPJ)

• The bank
• Mirror image of the business cash journals
• The bank sees us (business account) as a liability
• To increase a liability – credit
• The decrease a liability - debit

4/22/24 2
BANK ACCOUNT

Dr + BANK Cr -
Increase Decrease

Sample Footer Text 4/22/24 3

RECONCILIATION PROCESS
Items NOT in the business cash journals Items NOT on the bank statement
1. Bank charges (service fees, cash deposit fees, cost 1. Deposits made but not yet recorded by the bank
of cheque book etc) because they were made to close to the statement
date. Not yet processed by the bank – will only
appear on following month statement
2. Payments made by the bank for debit/stop orders 2. Cheques issued but not yet recorded by the bank
(ie: insurance premium) because they have not presented to the bank for
payment
3. Deposit made directly into our bank account (by a
debtor)
4. Dishonoured cheques (R/D)
5. Interest on overdraft
These items do not appear in the business’s books These items do not appear in the banks books and
and must therefore be entered into the general must therefore be entered on the bank reconciliation
ledger bank account statement

4
STEPS FOR RECONCILLIATION

1. Compare: Closing balance in General Ledger bank account vs closing balance bank statement
If they don’t match move to 2.
2. Compare: cash journal and bank statement – circle items that do not appear in both sets of
records
3. Items on bank statement but not cash journal – must be entered into cash journals
4. Items on cash journal but not bank statement – must be entered on the bank reconciliation
statement
5. Any errors made in cash journals must be corrected in the cash journal
6. Any errors made by the bank must be corrected on the bank reconciliation

5
ILLUSTRATIVE EXAMPLE

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ABRIDGED CASH RECEIPTS JOURNAL DEC 20X1

Date Details
04 D.Duma 656
09 S.Sibiya 1312.00
14 Rent Recieved 984.00
21 P.Pillay 1695.76
28 G.Govender 602.34
31 S.Brewer 602.08
5 852.18

7
ABRIDGED CASH PAYMENTS JOURNAL FOR DEC
20X1
Date Details Cheque no. Bank (R)
05 P.Paul P1260 796.84
06 Rent Expense P1270 787.20
08 Stock P1280 3204.56
10 Happy Traders P1290 877.40
11 Beach Motors P1300 626.16
12 Green fingers Garden Services P1310 288.64
15 Rates and taxed – municipality P1320 116.12
21 Wages P1330 1476.00
30 Telephone – post office P1340 1233.28
9406.20
8
BANK RECON STATEMENT 30 NOVEMBER 20X1

R
Favourable balance per bank statement 522.50
Less: Outstanding cheques
P1020 131.20
P1040 137.04
P1080 1000.46
P1250 399.84
Add: Outstanding deposits 280.12
Balance as per bank account (865.92)

9
 Date Details Cheques (Debit) Deposits Balance
(Credit)
01 Balance 552.50 Cr

BANK 02
05
Deposit
Deposit
280.12
656.00
802.62
1458.62

STATEMENT 06
07
P1260
P1270
796.84
787.20
661.78
125.42 Dr

AS AT 09
11
P1280
Deposit
3204.56
1312.00
3329.08
2017.98
DECEMBER 12 SF (service fee) 20.00 2037.98
CB (cheque book printing) 29.52 2067.50
20X1 15 Deposit 984.00 1083.50
16 P1320 116.12 1199.62
22 Deposit 1695.76 496.14
23 P1330 1476.00 979.86
24 SO (SPCA) (Stop order) 164.00 1143.86
26 CU (R.Rudolf) (Cheque 492.00 1635.86
unpaid)
27 OI (overdraft interest) 110.54 1746.40
28 P1020 131.20 1877.60
10
30 SO (B.Square) (stop order) 65.60 1943.20 Dr
REQUIRED

• Prepare adjusted Cash journals (receipts and payments)

2. Items on bank statement but not cash journal – must be entered into cash journals
3. Items on cash journal but not bank statement – must be entered on the bank reconciliation
statement
• Post cash journals to general ledger bank account
• Prepare the bank reconciliation as at 31 Dec 20x1

Sample Footer Text 4/22/24 11

STEP 1. DEPOSIT – COMPARE CRJ WITH BANK
STATEMENT
• Remember – items on bank statement but not cash journal – must be entered into cash
journals
• Items on cash journal but not bank statement – must be entered on the bank reconciliation
statement

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 BANK STATEMENT
Date Details Cheques (Debit) Deposits (Credit) Balance
01 Balance 552.50
CPJ 02 Deposit 280.12 802.62
Details 05 Deposit 656.00 1458.62
04 D.Duma 656.00 06 P1260 796.84 661.78

09 S.Sibiya 1312.00 07 P1270 787.20 125.42

09 P1280 3204.56 3329.08
14 Rent Recieved 984.00
11 Deposit 1312.00 2017.98
21 P.Pillay 1695.76
12 SF (service fee) 20.00 2037.98
28 G.Govender 602.34 CB (cheque book printing) 29.52 2067.50
31 S.Brewer 602.08 15 Deposit 984.00 1083.50
5 852.18 16 P1320 116.12 1199.62
22 Deposit 1695.76 496.14
Red: Items on cash receipts 23 P1330 1476.00 979.86
and bank statement. 24 SO (SPCA) (Stop order) 164.00 1143.86
Highlighted: items on CRJ
26 CU (R.Rudolf) (Cheque 492.00 1635.86
but not bank statement
unpaid)
-> Go to BANK RECON
27 OI (overdraft interest) 110.54 1746.40
28 P1020 131.20 1877.60
13
30 SO (B.Square) (stop order) 65.60 1943.20
 Bank Recon BANK STATEMENT
R Date Details Cheques (Debit) Deposits (Credit) Balance
522.50
01 Balance 552.50
Less: Outstanding
cheques 02 Deposit 280.12 802.62
P1020 131.20 05 Deposit 656.00 1458.62
P1040 137.04 06 P1260 796.84 661.78
P1080 1000.46 07 P1270 787.20 125.42
P1250 399.84 09 P1280 3204.56 3329.08
Add: Outstanding 280.12 11 Deposit 1312.00 2017.98
deposits
12 SF (service fee) 20.00 2037.98
Balance as per bank (865.92)
account CB (cheque book printing) 29.52 2067.50
Details 15 Deposit 984.00 1083.50
04 D.Duma 656.00 16 P1320 116.12 1199.62
09 S.Sibiya 1312.00 22 Deposit 1695.76 496.14
14 Rent Recieved 984.00 23 P1330 1476.00 979.86
24 SO (SPCA) (Stop order) 164.00 1143.86
21 P.Pillay 1695.76
26 CU (R.Rudolf) (Cheque unpaid) 492.00 1635.86
28 G.Govender 602.34
31 S.Brewer 602.08 27 OI (overdraft interest) 110.54 1746.40
28 P1020 131.20 1877.60
5 852.18 14
Cash Receipts 30 SO (B.Square) (stop order) 65.60 1943.20
 ABRIDGED CASH RECEIPTS JOURNAL DEC 20X1
Date Details
04 D.Duma 656.00
09 S.Sibiya 1312.00
14 Rent Recieved 984.00
21 P.Pillay 1695.76
28 G.Govender 602.34
31 S.Brewer 602.08
5 852.18

Day Bank (R)

30 Total Receipts 5 852.18
5 852.18
15
STEP 2. CHEQUES – COMPARE CPJ WITH BANK
STATEMENT
• Remember – items on bank statement but not cash journal – must be entered into cash
journals
• Items on cash journal but not bank statement – must be entered on the bank reconciliation
statement

Sample Footer Text 4/22/24 16

Date Details Cheque no. Bank (R) Date Details Cheques Deposits Balance
(Debit) (Credit)
05 P.Paul P1260 796.84
01 Balance 552.50
06 Rent Expense P1270 787.20
02 Deposit 280.12 802.62
08 Stock P1280 3204.56
05 Deposit 656.00 1458.62
10 Happy Traders P1290 877.40
06 P1260 796.84 661.78
11 Beach Motors P1300 626.16
07 P1270 787.20 125.42
12 Green fingers P1310 288.64
Garden 09 P1280 3204.56 3329.08
Services
11 Deposit 1312.00 2017.98
15 Rates and P1320 116.12
taxed – 12 SF (service fee) 20.00 2037.98
municipality
CB (cheque book printing) 29.52 2067.50
21 Wages P1330 1476.00
15 Deposit 984.00 1083.50
30 Telephone – P1340 1233.28
post office 16 P1320 116.12 1199.62
9406.20 22 Deposit 1695.76 496.14

Red: Items on cash payments 23 P1330 1476.00 979.86

journal and bank statement. 24 SO (SPCA) (Stop order) 164.00 1143.86
26 CU (R.Rudolf) (Cheque unpaid) 492.00 1635.86
Highlighted: items on CPJ but
not bank statement 27 OI (overdraft interest) 110.54 1746.40
-> Go to BANK RECON 28 P1020 131.20 1877.60
30 SO (B.Square) (stop order) 65.60 1943.20
17
Date Details Cheque no. Bank (R) Date Details Cheques Deposits Balance
(Debit) (Credit)
05 P.Paul P1260 796.84
01 Balance 552.50
06 Rent Expense P1270 787.20
02 Deposit 280.12 802.62
08 Stock P1280 3204.56
05 Deposit 656.00 1458.62
10 Happy Traders P1290 877.40
06 P1260 796.84 661.78
11 Beach Motors P1300 626.16
07 P1270 787.20 125.42
12 Green fingers P1310 288.64
Garden 09 P1280 3204.56 3329.08
Services
11 Deposit 1312.00 2017.98
15 Rates and P1320 116.12
taxed – 12 SF (service fee) 20.00 2037.98
municipality
CB (cheque book printing) 29.52 2067.50
21 Wages P1330 1476.00
15 Deposit 984.00 1083.50
30 Telephone – P1340 1233.28
post office 16 P1320 116.12 1199.62
9406.20 22 Deposit 1695.76 496.14

Red: Items on cash payments 23 P1330 1476.00 979.86

journal and bank statement. 24 SO (SPCA) (Stop order) 164.00 1143.86
26 CU (R.Rudolf) (Cheque unpaid) 492.00 1635.86
Highlighted: items on CPJ but
not bank statement 27 OI (overdraft interest) 110.54 1746.40
-> Go to BANK RECON 28 P1020 131.20 1877.60
30 SO (B.Square) (stop order) 65.60 1943.20
18
Date Details Cheque no. Bank (R) Date Details Cheques Deposits Balance
(Debit) (Credit)
05 P.Paul P1260 796.84
01 Balance 552.50
06 Rent Expense P1270 787.20
02 Deposit 280.12 802.62
08 Stock P1280 3204.56
05 Deposit 656.00 1458.62
10 Happy Traders P1290 877.40
06 P1260 796.84 661.78
11 Beach Motors P1300 626.16
07 P1270 787.20 125.42
12 Green fingers P1310 288.64
Garden 09 P1280 3204.56 3329.08
Services
11 Deposit 1312.00 2017.98
15 Rates and P1320 116.12
taxed – 12 SF (service fee) 20.00 2037.98
municipality
CB (cheque book printing) 29.52 2067.50
21 Wages P1330 1476.00
15 Deposit 984.00 1083.50
30 Telephone – P1340 1233.28
post office 16 P1320 116.12 1199.62
9406.20 22 Deposit 1695.76 496.14

Red: Items on cash payments 23 P1330 1476.00 979.86

journal and bank statement. 24 SO (SPCA) (Stop order) 164.00 1143.86
26 CU (R.Rudolf) (Cheque unpaid) 492.00 1635.86
BLUE: items on Bank Statement
but not in CPJ 27 OI (overdraft interest) 110.54 1746.40
-> Go to CPJ 28 P1020 131.20 1877.60
30 SO (B.Square) (stop order) 65.60 1943.20
19
 Date Details Cheques Deposits Balance
(Debit) (Credit)
01 Balance 552.50
02 Deposit 280.12 802.62
ABRIDGED 05 Deposit 656.00 1458.62

CASH
06 P1260 796.84 661.78
07 P1270 787.20 125.42

PAYMENTS 09
11
P1280
Deposit
3204.56
1312.00
3329.08
2017.98

JOURNAL DEC Total CPJ

(as given in CPJ)
12 SF (service fee)
CB (cheque book printing)
20.00
29.52
2037.98
2067.50

20X1 15 Deposit 984.00 1083.50

Day Bank (R) 16 P1320 116.12 1199.62

22 Deposit 1695.76 496.14
30 Total Payments 9406.20
23 P1330 1476.00 979.86
Bank Charges (SF + CB) 49.52
24 SO (SPCA) (Stop order) 164.00 1143.86
26 CU (R.Rudolf) (Cheque unpaid) 492.00 1635.86
Interest on Overdraft 110.54
27 OI (overdraft interest) 110.54 1746.40
Stop Order (SPCA) 164.00
28 P1020 131.20 1877.60
Stop Order (B. Sqaured) 65.60 30 SO (B.Square) (stop order) 65.60 1943.20
Debtors (Dishonoured Cheque) 492.00
10 287.86
20
ABRIDGED CASH PAYMENTS JOURNAL DEC 20X1

Day Bank (R)

30 Total Payments 9406.20
Bank Charges (SF + CB) 49.52

Interest on Overdraft 110.54

Stop Order (SPCA) 164.00

Stop Order (B. Squared) 65.60
Debtors (Dishonoured Cheque) 492.00
10 287.86

21
 ABRIDGED CASH RECEIPTS JOURNAL DEC 20X1
Date Details
04 D.Duma 656
09 S.Sibiya 1312.00
14 Rent Recieved 984.00
21 P.Pillay 1695.76
28 G.Govender 602.34
31 S.Brewer 602.08
5 852.18

Day Bank (R)

30 Total Receipts 5 852.18
5 852.18
22
BANK RECONCILIATION STATEMENT AS AT 31
NOVEMBER 20X1
R
Favourable balance as per bank statement 522.50
Less: Outstanding cheques
P1020 131.20
P1040 137.04
P1080 1000.46
P1250 399.84
Add: Outstanding deposits 280.12
Balance as per bank account (865.92)

23
GENERAL LEDGER - BANK From
Bank
Rec on – 3
0 Nov 2
0x1
Bank Account is an ASSET (Increases on debit, decreases on credit side)

dr BANK cr
Dec 31 20x1 Receipts 5852.18 Dec 01 20x1 Balance 865.92
31 Payments 10 287.86
Balance c/d 5301.60

From abridged cash receipts journal

(after adjustments )December 20x1 From abridged cash payments journal
(after adjustments )December 20x1

4/22/24 24
GENERAL LEDGER - BANK

Bank Account is an ASSET (Increases on debit, decreases on credit side)

dr BANK cr
Dec 31 20x1 Receipts 5852.18 Dec 01 20x1 Balance 865.92
31 Payments 10 287.86
Balance c/d 5301.60
11 153.78 11 153.78
1 Jan 20x2 Balance 5 301.60

4/22/24 25
 BANK RECONCILIATION STATEMENT AS AT 31
DECEMBER 20X1 BANK RECON NOVEMBER 20x1
Less: Outstanding cheques
P1020 131.20
P1040 137.04
P1080 1000.46
BANK STATEMENT P1250 399.84
Date Details Cheques Deposits Add: Outstanding deposits
Balance 280.12
(Debit) (Credit)
Balance as per bank (865.92)
01 Balance 552.50
account
06 P1260 796.84 661.78
07 P1270 787.20 125.42
These are on Bank
09 P1280 Statement and CPJ 3204.56 3329.08
16 P1320 116.12 1199.62
23 P1330 1476.00 979.86
28 P1020 131.20 1877.60 26
BANK RECONCILIATION STATEMENT AS AT 31
DECEMBER 20X1 BANK RECON NOVEMBER 20x1
Less: Outstanding cheques
Debit (R) Credit (R)
P1020 131.20
Debit balance per bank statement 522.50
P1040 137.04
Less: Outstanding cheques
P1080 1000.46
P1040 137.04
P1250 399.84
P1080 1000.46
Add: Outstanding deposits 280.12
P1250 1000.46
Balance as per bank (865.92)
account

Add: Outstanding deposits

Balance as per bank account 27

BANK RECONCILIATION STATEMENT AS AT 31
CASH PAYMENT JOURNAL
The cheques not on the Bank Statement .. Go to bank
Recon

DECEMBER 20X1
Date Details Cheque no. Bank (R)

05 P.Paul P1260 796.84

06 Rent Expense P1270 787.20

Debit (R) Credit (R)
08 Stock P1280 3204.56
Debit balance per bank statement 522.50
10 Happy Traders P1290 877.40
Less: Outstanding cheques
11 Beach Motors P1300 626.16
P1040 137.04
12 Green fingers P1310 288.64
P1080 1000.46 Garden
Services
P1250 1000.46 15 Rates and P1320 116.12
taxed –
P1290 877.40 municipality

P1300 626.16 21 Wages P1330 1476.00

P1310 288.64 30 Telephone –

post office
P1340 1233.28

P1340 1233.28 9406.20

Add: Outstanding deposits

Balance as per bank account 28
BANK RECONCILIATION STATEMENT AS AT 31
DECEMBER 20X1 CPJ
The deposits not on bank account
Debit (R) go to
Credit Bank Recon
(R)
Debit balance per bank statement 1943.20 Details
Less: Outstanding cheques 04 D.Duma 656.00
P1040 137.04 09 S.Sibiya 1312.00
P1080 1000.46 14 Rent Recieved 984.00
P1250 1000.46 21 P.Pillay 1695.76
P1290 877.40 28 G.Govender 602.34
P1300 626.16 31 S.Brewer 602.08
P1310 288.64 5 852.18
P1340 1233.28
Add: Outstanding deposits 602.34
602.08
Balance as per bank account

29
BANK RECONCILIATION STATEMENT AS AT 31
DECEMBER 20X1
LEDGER
Debit (R) Credit (R)
dr BANK ACCOUNT c
Debit balance per bank statement 1943.20
Dec 31 20x1 Receipts 5852.18 Dec 01 20x1 Balance 865.92
Less: Outstanding cheques
31 Payments 10 287.86
P1040 137.04
Balance c/d 5301.60
P1080 1000.46
11 153.78 11 153.78
P1250 1000.46
Jan 1 20x2 Balance 5 301.60
P1290 877.40
P1300 626.16
P1310 288.64
P1340 1233.28
Add: Outstanding deposits 602.34
602.08
Balance as per bank account 5 301.60

30
BANK RECONCILIATION STATEMENT AS AT 31
DECEMBER 20X1
Debit (R) Credit (R)
Debit balance per bank statement 1943.20
Less: Outstanding cheques
P1040 137.04
P1080 1000.46
P1250 399.84
P1290 877.40
P1300 626.16
P1310 288.64
P1340 1233.28
Add: Outstanding deposits 602.34
602.08
Balance as per bank account 5 301.60
6 506.02 6 506. 02 31
HOMEWORK

• Try Test yourself 7.1 (page 174)

4/22/24 32