Part XII. Bank Reconciliation
Chapter 83. Bank Reconciliation
Introduction to Bank Reconciliations
In addition to the petty cash account, the bank account is the only source where money can physically flow into
and out of the business. The bank account should be strictly monitored to ensure that al the monies that are
received are deposited, and that al the payments amd / or cheques have been honoured.
TurboCASH allows you to match, or reconcile, your Cashbook with the bank statement you receive from the bank.
The bank reconciliation is a process of checking and comparing the transactions in your cashbook with the
transactions on the bank statement.
Al the transactions on the bank statement should be reflected in the cashbook and those transactions appearing
in the cashbook, but not on the bank statement, should be reflected on the bank reconciliation statement. This
process can be il ustrated as follows:
When the bank statement is received, you wil find that any bank costs (and interest if you have an overdrawn
cheque account) is debited, and any interest that you have received on a positive bank balance is credited to your
bank account. These transactions wil appear on your bank statement, but wil not appear in your cashbook. The
same applies for debit orders and electronic payments as wel as monies paid directly into your bank account by
your customers or other parties.
The bank reconciliation helps you to identify these transactions and enter them into your cashbook. Another
reason is the time factor. If you send a cheque to another supplier by post, this can take some time and the other
party (beneficiary) to whom the cheque is issued, may bank the cheque too late for the bank to clear the cheque
and reflect it on your bank statement. You may also have made a deposit up, after banking hours, and the deposit
wil only be reflected on the bank statement on the next day.
The bank reconciliation is carried out for a number of reasons. These are:
1. Determining of outstanding cheques and deposits and reporting it in the Cashbook Reconciliation Report:
Outstanding deposits Monies may have been received after banking hours and deposited into
your bank account on the next day of the month or the day after the bank statement was printed.
Outstanding cheques Al cheques that were issued may not yet have been presented to the
bank by the recipient or beneficiary of the cheque. The cheque may have been presented at a
different bank or may not yet have reached the beneficiary of the cheque.
These outstanding deposits and cheques will be reported in the Bank Reconciliation
Statement or Cashbook Reconciliation Report and should be reflected in the bank
statement for the next reconciliation period. Should a cheque be outstanding for a
second consecutive period, you need to follow it up with the supplier or beneficiary, since
the cheque may be lost in the post, etc.
2. Recording of transactions on the bank statement which do not appear in the cashbook:
Electronic payments Some electronic payments by debit orders may not reflect in the
cashbook, but do appear on the bank statement.
Bank charges and interest The amount of these bank charges wil only be known when the
bank statement is received. Interest may also be received on a favourable bank balance and can
only be recorded when the amount is known.
Dishonoured cheques Sometimes cheques deposited may have been returned to the drawer
as there are no funds in the drawers account, or the cheque has not been signed, or many other
The transactions on the deposits (credit) side of the bank statement which are not yet
recorded in the cashbook, should be entered in the receipts journal. The transactions
on the payments (debit) side of the bank statement which are not yet recorded in the
664 - The Complete TurboCASH Reference Guide