Bank reconciliation
What is a bank reconciliation?
A bank reconciliation explains why the cash book and the bank statement show different balances on the same day.
First the cash book is updated for items the bank knew first, such as bank charges and direct debits.
Then a statement starts from the balance on the bank statement, adds outstanding lodgements and takes off unpresented cheques. The answer must match the cash book.
Example
The bank statement shows £2,310.00. A lodgement of £400.00 and a cheque for £160.00 are in the cash book but not yet on the statement. £2,310.00 plus £400.00 less £160.00 is £2,550.00, which is the balance in the cash book.
Why it matters
If the reconciliation does not reach the cash book figure, something is still unexplained. A line is never added just to force the two to agree.
Practise it
Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].