Dunman Sec Notes on Bank Reconciliation with Annotations

1 DUNMAN SECONDARY SCHOOL NAME: __________________________ ( ) CLASS: ____ CHAPTER 8: BANK RECONCILIATION 8.1 Bank Statement Bank statement is a statement that the bank sends to the business at regular intervals to update the business on its Bank Account. It gives details of the money drawn out and deposits made by the business. Dunman Trading ACCOUNT NO : 5467890-1 21 Tampines Street 45 Page : 1 of 1 Singapore 529093 Consolidated Bank Statement from 1 January 2021 to 31 January 2021 Date Particulars Withdrawal Dr ($) Deposit Cr ($) Balance ($) Jan 1 Balance b/d 10 000 Cr 13 Cheque no. 12341 100 9 900 Cr 18 Credit transfer – Rental 1 000 10 900 Cr 25 Standing order – insurance 200 10 700 Cr 25 Cheque 3 000 13 700 Cr 29 Cheque no. 12342 600 13 100 Cr 31 Bank charges 10 13 090 Cr  Debit column of the bank statement: Records all payment from the bank account  Credit column of the bank statement: Records all deposits into the bank account  Balance column of the bank statement: shows the balance in the bank after each transaction. o Credit balance indicates a positive balance in the bank. o Debit balance indicates an overdraft balance in the bank.

2 Business Perspective DBS Bank Perspective I received a cheque of $1 000 from a debtor and deposit it into the DBS bank. I shall record $1 000 as a debit in the Cash at Bank Account as it is my asset. We received $1 000 from our customer Dunman Trading for safekeeping. The money does not belong to us. We shall treat the amount as our liability as the bank “owe” Dunman $1 000. Debit means deposit. Credit means withdrawal. Credit means deposit. Debit means withdrawal. 8.2 Purpose of Bank Reconciliation Bank reconciliation is usually performed at the end of the month when the bank statement is received. It is to reconcile the differences between the cash at bank account and the bank statement. Bank reconciliation also checks for errors in the cash at bank account and bank statement. The difference between the ending balances in the business cash at bank account and the bank statement is due to timing differences in recording. Timing differences happen when: Business has recorded the transaction but the bank has not. Business has not recorded the transaction but the bank has.

3 8.3 Examples of Timing Differences     

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5 8.4 Bank Reconciliation Same opening balances Step 1: Circle the differences between Cash at bank account and Bank statement. Cash at bank account Date Particulars Cheque Dr ($) Cr ($) Bal ($) 2021 Apr 1 Balance b/d 500 Dr 5 Rozz Trading 0545 15 485 Dr 9 Sales revenue 300 785 Dr 14 Andrew Co 40 825 Dr 26 Phoenix Ltd 0546 25 800 Dr May 1 Balance b/d 800 Dr Bank s