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Bank Statement Reconciliation

VleeVlee Well-KnownRegistered Posts: 136

I'm almost ready to say I am done self studying L2, I know I could pass an exam from all the practice ones I've done (except CA) but one thing I feel less confident about is the bank statement reconciliation. The reconciliation form itself is fine it is just knowing which payments to include in the cash book before balancing it. My book doesn't explain it and I can't see anything on MyAAT, but some payments in and out at the beginning of the month are added to the CB and others aren't. Is there a rule to use for this? So cheques maybe included in last month's CB balance but BACS etc won't be? So Do I have to make an assumption that they recorded the cheques received and sent out but didn't record BACS payments prior to the date recorded on the bank statement?

My book didn't seem to explain this but did include questions where this occurred.



  • stevefstevef Well-Known CarmarthenRegistered Posts: 258
    All items should appear in the cash book on the date they occur. So cheques get recorded in the cash book in the month they are dated and BACS payments on the date that the file was transmitted. So the cash book , when carrying out a bank reconcilliation, should contain all the transactions dated up to the reconcilliation date.
  • steve2008steve2008 Feels At Home Registered Posts: 89
    The way I see it, is that anything you know about should be added there and then. You know you have written a cheque, so you add it to the CB. You don't know the BACS payment is there until you get the bank statement.

    I find the setup in the exam rather odd as they just give you 1 number for "outstanding transactions". In my mind, and my business, it would make more sense to record the LIST of the outstanding transactions. Then it's obvious which ones relate to the previous month. From what I remember, you just need to play around until you get the right number, but mostly it should be fairly easy to work out which ones are old, the cheque numbers help there too.

    I don't think there are any specific rules though. at the end of the day the CB should match the bank statement, the more items you put on there as you go, the less work you need to do for bank reconciliation.
  • stevefstevef Well-Known CarmarthenRegistered Posts: 258
    Yes there is a rule, the cash book is the foundation of the double entry book keeping sysytem and as so must record correctly all cash/bank transactions at the date they occur.

    It is not unusual for the balance on the cash book not to agree to the balance on the shown on the bank statements at any given due to unpresented cheques, cash receipts not yet banked and errors on the bank statement. This is why you prepare a bank reconcilliation statement, to explain the difference.
  • VleeVlee Well-Known Registered Posts: 136
    Steve2008 thanks, I think that sounds like I am heading in the right direction and playing around with the numbers sounds about right.

    Obviously it's different in the real world and I'd have the previous month's CB to look at but the exams don't, so a bit of guess work and experimenting should work. I found a an elearning pack on MyAAT for AP1 and this bit wasn't explained. I will go with cheques on 1/2nd month as being recorded in the previous month but BACS etc should be recorded in the current month. I'm off to give it a try.
  • CeeJaySixCeeJaySix Well-Known Registered Posts: 645
    It really does come down to what's recorded in the cashbook, which is why AAT just give you a number to use. If you had a cashbook, you would 'tick back' the transactions on the bank statement to the corresponding transactions in the cashbook; any transactions left in the cashbook that occur before the cut-off date for the period and do not have a corresponding bank statement entry are then your outstanding payments/receipts, as they haven't yet been processed by the bank.

    When things are entered in the cashbook depends largely on the accounting policy of the company in question, so for every company things will be a little different.
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