Preparing a Bank

Reconciliation
Statement

Or How to balance the books in

one easy lesson.

2
Cash Receipts Journal of ABC Stores

Dis count Allowe d.

Amount Ba nke d

Tra de De btors

Ca s h S a le s

Divide nds

S undrie s
Re f No.
Date De tails
1-S e p-01 S ale s CRR1 100 100
4-S e p-01 J one s & Co 1 200 200
8-S e p-01 S ale s CRR2 400 400
12-S e p-01 S mith Ltd 2 10 90 90
15-S e p-01 S ale s CRR3 2250 2250
16-S e p-01 Brown Bros . 3 15 135 135
25-S e p-01 S ale s CRR4 1250 1250
29-S e p-01 S ale s CRR5 5000 5000
25 9425 425 9000

1
Complete the cash receipts journal for the period
under consideration.

Cash Receipts Journal of ABC Stores

Dis count Allowe d.

Amount Ba nke d

Tra de De btors

Ca s h S a le s

Divide nds

S undrie s
Re f No.
Date De tails
1-S e p-01 S ale s CRR1 100 100
4-S e p-01 J one s & Co 1 200 200
8-S e p-01 S ale s CRR2 400 400
12-S e p-01 S mith Ltd 2 10 90 90
15-S e p-01 S ale s CRR3 2250 2250
16-S e p-01 Brown Bros . 3 15 135 135
25-S e p-01 S ale s CRR4 1250 1250
29-S e p-01 S ale s CRR5 5000 5000
25 9425 425 9000

3
Complete the cash payments journal for the period
under consideration.
Cash Payments Journal of ABC Stores

Inte re s t on Mortga ge
Dis count Re ce ive d

Tra de Cre ditors

S undrie s

De ta ils
Chq

Amount P a id
Date P articulars
No

Te le phone

S a la rie s
1-S e p AAP T 1253 2348 2348
AAP T 1254 680 680
3-S e p National Bank 1255 1542 1542
6-S e p Fly High Fre ight 1256 105 5125 5125
EMS Mail 1257 45 2190 2190
8-S e p S te phan J 1258 1100 1100
Rob Y 1259 1100 1100
J udy B 1260 2650 2650
14-S e p S undry Cre ditor 1261 500 500 e quipme nt
19-S e p IP EC Air Expre s s 1262 124 6086 6086
29-S e p Knox Council 1263 625 625 rate s
30-S e p Holde nwis e 1264 450 450 s e rvice

274 24396 13401 3028 1542 4850 1575

4
 Prepare a Cash Balance Summary

ABC S to re s
Cas h Balanc e S ummary as at S e pte mbe r 30
Ope ning Ba la nce a s a t S e pte mbe r 1 $ 17,500
Add ca s h re ce ipts for S e pte mbe r $ 9,425
$ 26,925
Le s s ca s h pa yme nts for S e pte mbe r $ 24,396
Clos ing Ba la nce a s a t S e pte mbe r 30 $ 2,529

5
 Compare the Cash Balance Summary with the closing
balance showing in the Bank Statement.

S ta te me nt of Account
S t. Drag o n Bank - Lo c al Branc h

30-S e p-01 $ 1,498 CR

ABC Store s
Cas h Balanc e Summary as at Se pte mbe r 30
Ope ning Ba la nce a s a t Se pte mbe r 1 $ 17,500
Add ca s h re ce ipts for Se pte mbe r $ 9,425
$ 26,925
Le s s ca s h pa yme nts for Se pte mbe r $ 24,396
Clos ing Ba la nce a s a t Se pte mbe r 30 $ 2,529
6
 S ta te me nt of Account
S t. Drag o n Bank - Lo c al Branc h
ABC S tore s
123 S tre e t Account No: 12 345 678
Ma intown 3888 P a ge No. 1
Da te P a rticula rs De bit Cre dit Ba la nce
1-S e p-01 Ba la nce Forwa rd $ 17,500 CR
2-S e p-01 C/C $ 100 $ 17,600 CR
5-S e p-01 C/C $ 200 $ 17,800 CR
1253 $ 2,348 $ 15,452 CR
9-S e p-01 1255 $ 1,542 $ 13,910 CR
10-S e p-01 1254 $ 680 $ 13,230 CR
11-S e p-01 1256 $ 5,125 $ 8,105 CR
1257 $ 2,190 $ 5,915 CR
12-S e p-01 C/C $ 400 $ 6,315 CR
13-S e p-01 C/C $ 90 $ 6,405 CR
14-S e p-01 1258 $ 1,100 $ 5,305 CR
15-S e p-01 C/C $ 2,250 $ 7,555 CR
1259 $ 1,100 $ 6,455 CR
16-S e p-01 C/C $ 135 $ 6,590 CR
27-S e p-01 C/C $ 1,250 $ 7,840 CR
28-S e p-01 1262 $ 6,086 $ 1,754 CR
30-S e p-01 1261 $ 500 $ 1,254 CR
30-S e p-01 Divide nds - XY Mining $ 250 $ 1,504 CR
7
30-S e p-01 BADT $ 6 $ 1,498 CR
It is very rare that the two balances will be the same!

Reasons:
1. Items have been included in the Bank Statement but
do not appear in the cash journals
2. Items have been included in the cash journals which
do not appear on the bank statement

8
Circle any items that appear on the bank statement but are
not included in the cash receipts or payments journals.

Bank Statement extract

28-Se p-01 1262 $ 6,086 $ 1,754 CR
30-Se p-01 1261 $ 500 $ 1,254 CR
1-Oct-01 Divide nds - XY Mining $ 250 $ 1,504 CR
2-Oct-01 BADT $ 6 $ 1,498 CR

9
Why might items on the Bank Statement not be
included in the cash journals?
•Dividends or bank interest directly added (credited) to your
bank account balance
•Bank fees or government charges deducted (debited) from
your bank account balance by the bank
•Dishonoured cheques may have been deducted (debited)
from your bank balance

10
Why might items have been included in the cash
journals which do not appear on the bank
statement?
•Cheques have been entered in the cash payments
journal but have not yet been presented at our bank
by the recipient of the cheque (unpresented cheques)
•Cheques received by us from customers have been
entered in the cash receipts journal but have not yet
been banked.

11
The Bank Reconciliation Process

Step One:
Update the cash receipts and payments journals with any items
which appear on the Bank Statement but which have not yet been
included in our cash records.

12
Cash Receipts Journal of ABC Stores
The cash receipts

Amount Ba nke d
journal must be
adjusted to include
items appearing in
Date De tails the “Credit”
column of the
bank statement
Divide nds 250
that were not in
9675 our cash receipts
records.
The “Amount Banked” total
should then be re-calculated

13
Cash Receipts Journal of ABC Stores

Dis count Allowe d.

Amount Ba nke d

Tra de De btors

Ca s h S a le s

Divide nds

S undrie s
Re f No.
Date De tails
1-S e p-01 S ale s CRR1 100 100 The c as h payme nts jo urnal
4-S e p-01 J one s & Co 1 200 200 and c as h re c e ipts jo urnals
8-S e p-01 S ale s CRR2 400 400 mus t be adjus te d to inc lude
12-S e p-01 S mith Ltd 2 10 90 90 ite ms appe aring o n the bank
15-S e p-01 S ale s CRR3 2250 2250 s tate me nt that we re no t in
o ur c as h re c o rds .
16-S e p-01 Brown Bros . 3 15 135 135
25-S e p-01 S ale s CRR4 1250 1250
29-S e p-01 S ale s CRR5 5000 5000
Divide nds 250 250
25 9675 425 9000 250

14
Cash Payments Journal of ABC Stores

Chq
Date P articulars

Amount
No

P a id
30-Se p FID 6
The cash payments journal
journal must be adjusted to 24396
include items appearing in 24402
the “Debit column” of the
bank statement that were not The “Amount Paid” total
in our cash payments should then be re-calculated
records.

15
Cash Payments Journal of ABC Stores

Te le phone

S undrie s
Re ce ive d

Mortga ge

De ta ils
Dis count

Cre ditors
Chq

S a la rie s
Amount

Inte re s t
Date P articulars
No

Tra de
P a id
1-S e p AAP T 1253 2348 2348
AAP T 1254 680 680
3-S e p National Bank 1255 1542 1542
6-S e p Fly High Fre ight 1256 105 5125 5125
EMS Mail 1257 45 2190 2190
8-S e p S te phan J 1258 1100 1100
Rob Y 1259 1100 1100
J udy B 1260 2650 2650
14-S e p S undry Cre ditor 1261 500 The c as h payme nts jo urnal 500 equipment
19-S e p IP EC Air Expre s s 1262 124 6086 6086 and c as h re c e ipts jo urnals
29-S e p Knox Council 1263 625 mus t be adjus te d to inc lude 625 rate s
30-S e p Holde nwis e 1264 450 ite ms appe aring o n the bank 450 s e rvice
30-S e p FID 6 s tate me nt that we re no t in 6
o ur c as h re c o rds .

274 24396 13401 3028 1542 4850 1581

24402 1587

16
After completing Stage One prepare another Cash
Balance Summary and compare it with the balance in
the Bank Statement. It is more than likely that the two
balances will still be different.
ABC S to re s
Cas h Balanc e S ummary as at S e pte mbe r 30
Ope ning Ba la nce a s S e pte mbe r 1
$ 17,500
Add ca s h re ce ipts for S e pte mbe r $ 9,675 $ 9,425
$ 26,925 $ 27,175
Le s s ca s h pa yme nts for S e pte mbe r $ 24,402 $ 24,396
$ 2,529 $ 2,773

Ba la nce a s pe r Ba nk S ta te me nt - S e pte mbe r 30 $ 1,498

17
Once you have updated the cash records it is then
necessary to prepare a bank reconciliation statement.

The purpose of this statement is to explain why our cash records

still differ from the bank statement.

18
 The Bank Reconciliation Process
Step Two:
Prepare a bank reconciliation
statement
• tick all items that appear in the
√ cash receipts journal AND in the
Credit column of the bank
statement.
For example:
2-S e p-01 C/C $ 100 √
5-S e p-01 C/C $ 200 √

19
Once all
items have
been ticked
the cash
receipts
journal
should
look like
this one:

20
21
Any unticked cash receipts items should be circled. They
represent Deposits Not Yet Credited and are added to the
closing Bank Statement balance when preparing the Bank
Reconciliation Statement.
For example:

Bank Re c o nc iliatio n S tate me nt fo r ABC S to re s

Ba la nce a s pe r Ba nk S ta te me nt - S e pte mbe r 30 $ 1,498
Add De pos its not ye t cre dite d
CRR5 $ 5,000
$ 6,498

22
The Bank Reconciliation Process
Step Two:
Prepare a bank reconciliation
statement
• tick all items that appear in the
cash payments journal AND in the
Debit column of the bank statement

√
√
√
√ 23
Once all
items have
been ticked
the cash
payment
journal
should
look like
this one:

24
Any unticked cash payment items should be circled. These will
usually represent Unpresented Cheques. They should be subtracted
from the closing Bank Statement balance when preparing the Bank
Reconciliation Statement.
For example:

Le s s Unpre s e nte d Che que s

Che que 1260 2650
Che que 1263 625
Che que 1264 450 $ 3,725
Ba la nce a s pe r ca s h s umma ry S e pte mbe r 30 $ 2,773

25
Once all items have been ticked the Bank Statement should appear
like the one shown below:

26
The Bank Reconciliation Process

The completed Bank Reconciliation Statement should

look like the one shown below:
Bank Re c o nc iliatio n S tate me nt fo r ABC S to re s
Ba la nce a s pe r Ba nk S ta te me nt - S e pte mbe r 30 $ 1,498
Add De pos its not ye t cre dite d
CRR5 $ 5,000
$ 6,498
Le s s Unpre s e nte d Che que s
Che que 1260 2650
Che que 1263 625
Che que 1264 450 $ 3,725
Ba la nce a s pe r ca s h s umma ry S e pte mbe r 30 $ 2,773
27