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Hello sir,
I would like to ask why don’t we just 2 more accounts for the cheques (cheques received and cheques paid) so we don’t have to add them to the balance and have a more clear comparison? And why do we use the cash book instead of just comparing the bank statement with the bank account? Thank you very much in advance.The whole purpose is to check that the cash book balance is correct by making sure that we can explain the difference between that and the balance on the bank statement.
Comparing the bank statement with the bank account would be pointless – they are the same thing!!
Have you watched my free lecture on this?
Hello sir,
thank you very much for your reply. My question is about the bank account. I mean that the column of the bank in the cash book, if it is updated correctly, should be equal to the bank account, or not? If this is true, then why should I not reconcile the bank statement with the bank account and then go back and correct the cash book? Sorry for asking again, I just don’t get it. Thank you very much again.Having two columns in a cash account is simply an alternative to having two separate t-accounts – one got petty cash and one for cash at the bank. However this is completely irrelevant for the exam (and is old-fashioned in practice anyway because of computers).
The balance of the bank columns is what the company has recorded as cash at bank. This will not equal the balance on the bank statement because of unpresented cheques etc..
That is why we prepare a bank reconciliation statement – so that we can make sure that we can explain the difference from the bank statement balance.You really must watch my free lectures on bank reconciliations.
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