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The following attempt at a bank reconciliation statement has been prepared by Q Co:
$
Overdraft per bank statement 38,600
Add: deposits not credited 41,200
79,800
Less: outstanding cheques 3,300
Overdraft per cash book 76,500
Assuming the bank statement balance of $38,600 to be correct, what should the cash book balance
be?
A $76,500 overdrawn, as stated
B $5,900 overdrawn
C $700 overdrawn
D $5,900 cash at bankWhy we take 41200 as a lodgements or cheque received ? we would take it if it was “deposits credited after date” but it is not credited. Please explain
Lodgement not credited are receipts that have already been entered in the cash account (debit cash) but have not yet appeared on the bank statement.
So it is correct to add them to the bank balance, but because at the moment it is overdrawn, the lodgements will turn it into a positive balance – not make it more overdrawn.
Again, please watch the free lectures – I can’t type them out here 🙂
Dear Mr Moffat
Do you discuss in your free lectures how bank reconciliations should be dealt with in present accounting period if there were timing differences at the end of previous accounting period ? If not, can you write few words about this issue ?
@rafapak said:
Dear Mr MoffatDo you discuss in your free lectures how bank reconciliations should be dealt with in present accounting period if there were timing differences at the end of previous accounting period ? If not, can you write few words about this issue ?
I watched all 3 parts of your lecture and in one moment you say that in next accounting period timing differences from previous accounting period must be dealt with plus new cheques will appear. Can you write few words more and provide example that shows how timing differences from previous period should be dealt with in present ( next ) period ? In other words, how timing differences from March for instance should be dealt with in April ?
It doesn’t affect the preparation of the bank reconciliation at the end of a period – that is always done the same way.
It is simply that in practice, when ‘ticking’ off the items in the cash account against items in the bank statement, the first few items in the bank statement will be items that were in the cash account last period but were unpresented cheques or lodgements not credited.
However that is simply something to be aware of in practice – it is not relevant for the exam and does not affect the reconciliation prepared at the end of the period.
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