Verification of Accounting Records
Bank Reconciliation
Bank Reconciliation questions test your ability to update the cash book for items not yet recorded, then reconcile the adjusted cash book balance with the bank statement balance. A reliable source of marks if you know the method.
Always update the cash book first before preparing the reconciliation statement. Common mistakes: adding bank charges instead of deducting them, and confusing outstanding cheques (deduct from bank statement) with deposits in transit (add to bank statement).
Key Concepts to Revise
Updating the Cash Book
Add items on the bank statement not yet in the cash book — bank charges, direct debits, interest, dishonoured cheques.
Outstanding Cheques
Cheques issued but not yet cleared by the bank. Deduct from the bank statement balance in the reconciliation.
Deposits in Transit
Receipts recorded in the cash book but not yet on the bank statement. Add to the bank statement balance.
Reconciliation Statement
Starts with bank statement balance, adjusts for timing differences, and arrives at the updated cash book balance.
Past Paper Questions
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