Bank Account Reconcilation Debits and Credit

System

Hi, I started in practice this week and it has been a baptism of fire! They had me reconcile a bank account from a cash book for the whole year - never having done foundation level this was all new, but they set it out in a way I haven't done before and I'm struggling, they had the following:

Opening Balance CR (the account was in overdraft)
Payments CR
These were added together to give a figure

Receipts DR
Closing balance DR (This balance was made up of the closing bank balance from the statement which was overdrawn plus unpaid cheques) This added up to the same figure as the credit side.

I can understand the rest but what is my double entry for the closing balance, why when it is money owed to the bank plus money owed from the company is it on the debit side? To make it worse the senior accountant did explain but I got home tonight and have totally forgotten! After this week I wonder what Im learning on my course as I feel I know nothing!

System

Re:Bank Account Reconcilation Debits and Credit

If you think of a bank t account on the debit side is any receipts and on the credit side is any payments. If a bank balance is overdrawn the balance b/d is on the credit side (so this is what they have added to your payments) and the balance c/d (to balance the account off) on an overdrawn account is on the debit side (with receipts). When the c/d balance is moved to a b/d balance it then moves to the other side to become a credit balance.

I hope I've not made it all unclear but your best bet is to draw yourself a t account and you should see what I mean.

Annette

System

Re:Bank Account Reconcilation Debits and Credit

Thanks Annette, as soon as I read your reply I remembered that the closing balance was the b/d figure, thanks again, I can sleep a bit better now.