BANK RECONCILIATION An organisations Bank Account balance often

BANK RECONCILIATION • An organisation’s Bank Account balance often differs from the balance shown on the Bank Statement prepared by the bank. • Why? UNIT 3 C MY CLUB 1

THINGS THE BANK MAY NOT KNOW YET • Cheques paid to creditors who may hold on to them before taking them to the bank days later • Deposits made into the bank on or near the date the statement is prepared ie too late to be included • If so, they will be included in the next statement UNIT 3 C MY CLUB 2

THINGS THE ORGANISATION MAY NOT KNOW YET • Standing orders and direct debits can be forgotten about but the bank always remembers them • How much Bank Charges are - until the bank tells them in the statement • Deposits made straight through the bank rather than to the organisation (BGCs) UNIT 3 C MY CLUB 3

THINGS TO REMEMBER • The Bank Statement and the Bank Account are a mirror image of each other ie payments made are recorded in the credit column of the bank account but the bank shows them in the debit column of the statement receipts are shown in the debit column of the bank account but appear in the credit column of the bank statement UNIT 3 C MY CLUB 4

HOW TO RECONCILE THE TWO • Step 1 Find the differences by ticking off all the matching items in the bank statement and bank account and circle the items for which there is no match • Step 2 Update the bank account using the circled items in the statement • Step 3 Prepare a bank reconciliation statement using the circled items in the bank account UNIT 3 C MY CLUB 5

STEP 1 - Finding the Differences BANK STATEMENT Treasurer Snappy Camera Club Date Description Dr Cr Balance 1 Ap Op Bal 6” 2860 Deposit 13” 004223 15” DD Bet Ph 250 3110 600 2510 60 2450 19” Deposit 28” 004256 30” Bank Chgs UNIT 3 C MY CLUB 20 2470 120 2350 10 2340 6

STEP 2 - Updating the Bank Account 30 Apr DD Better Photo 30 Apr Bank Charges UNIT 3 C MY CLUB 60 10 2805 2795 7

STEP 3 - The Bank Reconciliation Statement Snappy Camera Club BANK RECONCILIATION STATEMENT AS AT 30 APRIL…. Bank Statement Balance Add Items deposited not yet shown: Subscriptions Less Unpresented Cheques: Secretary’s Expenses 305 Advertising 40 Corrected Bank Account Balance UNIT 3 C MY CLUB £ 2340 800 3140 345 2795 8

KEY WORDS a standing order a method of payment for a regular sum to the same person, the same time every month a bank giro credit a payment directly into your bank account a direct debit similar to a standing order but the payee instructs the bank to deduct the amount from your account every month bank charges the amount you pay the bank for setting up standing orders and direct debits. UNIT 3 C MY CLUB 9