Why the two balances differ
The cash book and the bank statement rarely show the same balance on the same day. A bank reconciliation explains the gap.
In this room: 2 tasks, 8 questions
- Timing differences4 questions
- Items the bank knows first4 questions
The business writes a payment in its cash book on the day it is made. The bank only shows it when the money actually moves.
- Unpresented cheque
- a payment in the cash book that has not reached the bank statement yet
- Outstanding lodgement
- money paid in, in the cash book, that the bank has not shown yet
These are timing differences. They clear by themselves within a few days.
Answer the questions below
3 more questions follow in this task.
Some items appear on the bank statement before the business knows about them.
- Bank charges and interest
- Direct debits and standing orders
- Money paid in directly by a customer
These are not timing differences. The cash book is missing them, so the cash book must be updated.
Answer the questions below
3 more questions follow in this task.