DEPARTMENT OF EDUCATION

FINANCE DIVISION

TOPIC: BANK RECONCILIATION STATEMENT.

A Bank Reconciliation Statement is a document that matches the cash balance on a balance sheet
to the corresponding amount on its bank statement.

Purpose
Reconciling of two accounts helps determine if accounting changes are needed. Bank
reconciliations are completed at regular intervals to ensure that the company’s cash records are
correct. They also help detect fraud and any cash manipulations.

Bank reconciliation is the process of comparing entries in Cash Journals and Bank Statement. This
Process is useful; and very important internal control system of cash management;
I. To identify Unpresented cheques
II. To identify unrecorded deposits
III. To identify direct charges deducted by the bank
IV. To identify payments made by the bank; on prearrangements.
V. To identify direct deposits made to the bank account by customers
VI. To identify fraudulent payments and
VII. To identify errors in cash journals and bank statement.
In principal, entries in cash journals should tally with entries in the Bank Statement, but in actual
circumstances.

Documents to prepare Bank Reconciliation Statement are;

I. Bank Statement for the current month,
II. Cash Receipt Journal & Cash Payment Journal for the Current Month,
III. Bank Reconciliation Statement for the previous month.

Steps in Preparing Bank Reconciliation

1. Compare Entries in Cash Receipt Journal with entries in credit column of Bank Statement
and tick them off.
2. Compare entries in cash payment journal with entries in debit column of Bank statement
and tick them off.
 3. Compare unpresented cheques, shown in bank reconciliation statement of the previous
months with entries in debit column of bank statement and tick them off.
4. Compare unrecorded deposits, shown in bank reconciliation statement of the previous
month with entries in credit column of bank statement and tick them off.
5. Identify errors of recording that do not correspond to each items and place a? Against such.
6. Prepare bank reconciliation statement.

Prepare bank reconciliation statement.

If credit Balance is shown in the Bank Statement
❖ Add all unrecorded deposits in Step (1) and (4) above;
❖ Subtract all unpresented cheques in steps (2) and (3) above

BANK RECONCILIATION STATEMENT FORMAT

K K
Credit Balance as per Bank Reconciliation
Add: Unrecorded Deposits
Receipt No. XXX
Less: Unpresented Cheques
Cheque No. XXX
XXX
Debit Balance as per cash at Bank