A Bank Reconciliation Sample Explored

Bank reconciliation is important in the accounting process, since it reconciles and explains any differences between accounting records in cash book and financial data on the bank statement. Here we will explore bank reconciliation sample, which is the best way to understand how to do such reconciliation.

Process

Before exploring the sample, it is essential to understand the process:

* 1st step: difference between bank statement and cash book is identified
* 2nd step: compare cash records with the bank statement to find out exact items which are on the statement, but not in the cash book. These differences will be recorded as adjusting entries in the cash records and are usually called informational differences.
* 3rd step: required adjustments are made to the cash book
* 4th step: compare cash records with the bank statement and find out items which are on the cash book, but not on the statement. These items will be included into the reconciliation and are related to timing differences, i.e. made or received payments not yet recorded by the bank.

So these are the steps which need to be followed to prepare correct reconciliation.

Bank Reconciliation Sample

Based on a very simple example, explore how to make a reconciliation.

In the cash book for January there was the following data:

* Opening Balance, Jan 1_____________234
* Receipt from Agness, Jan 3__________1,560
* Payment to Rosy, Jan 15____________(45)
* Payment to Gody, Jan 31____________(540)
* Closing Balance, Jan 31_____________1,209

In the bank statement for January there was the following data:

* Opening Balance, Jan 31___________________________234
* Cheques received, Jan 5___________________________1,560
* Cheques paid, Jan 17______________________________(45)
* Payment from bank account to British Way, Jan 20_______(100)
* Closing Balance, Jan 31____________________________1,649

You can see that in cash records there is no payment to British Way, made directly from bank account. So cash book will be adjusted by 100 as a decrease in cash balance. Also on the bank statement there is no payment to Gody amounting to 540 as of January 31. This is a timing difference, which is not yet recorded by the bank. This amount will be included into the bank reconciliation.

So final bank reconciliation will be as follows:

* Not adjusted cash balance, Jan 31______________________1,209
* Adjusting British Way payment_________________________(100)
* Adjusted cash book balance, Jan 31_____________________1,109
* Add not presented cleques, Gody, Jan 31________________540
* Reconciled as per bank statement, Jan 31_________________1,649

Note that payment to Gody will appear on the bank statement in February.

SOURCE:
http://ezinearticles.com/?A-Bank-Reconciliation-Sample-Explored&id=4094184