How to draw up a bank reconciliation Statement ?

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The purpose of writing this blog is for Secondary 3 pupils who find it difficult to understand how to prepare a simple bank reconciliation statement and updated cash at bank.  A step by step way to prepare the statement is shown below.  
At the end of the blog,  more practice questions are given for POA pupils who cannot get hold of any related questions in the market.
Cash Book - Bank column shows the business's record of its cheque -- receipt and payment

Bank Statement - shows the deposits and withdrawals of the business as recorded by the bank with which the business opens its bank current account with.


Discrepancies ( differences) between the Cash Book and the Bank Statement

The firm and the bank do not enter the transactions in their respective books at the same time.
Therefore, on any given date, the balance in the Cash Book of the firm may differ from the balance on the Bank Statement

Entries in the cash book/cash at bank not found in the bank statement

Debit Entries
1) Deposit in transit/ deposit not yet credited

 Credit Entries
1) Deposit/cheque not yet presented

 Entries in the bank statement not found in the cash book/cash as bank

Debit Entries
1 Direct debits
2 Bank charges
3 Interest on bank overdraft
4 Dishonoured cheque


Credit Entries
1 Direct credit
2 Dividends
3 Interest on Fixed deposit

How to correct the bank statement and cash book balance differences?
Step 1 : Items that appear in both bank statement and cash book have to be cancelled off or
             put a tick next to it. 
Step 2: The items that are not cancelled /tick in the bank statement will be updated in the cash
             book. ( highlighted in blue below)
Step 3 : The items that are not cancelled/tick in the cash book will be updated in the bank
             reconciliation statement. (hightlighted in green below)






Question 2
Benny’s Cash Book (Bank columns only) for the month of June 2020 was as follows:
Cash at Bank account
Date
Particulars
Debit
Credit
Balance
  2020

$
$
  $
Jun 1
Balance b/d


950 Dr
2
Kyn
500

 1 450 Dr
4
Utilities (Cheque No : 9010)

700
750 Dr
8
Nanda (Cheque No : 9011)

100
650 Dr
12
Ling Li (Cheque No : 9012)

140
510 Dr
15
Nami
130

640 Dr
19
Aikin(Cheque No : 9013)

100
540 Dr
21
Advertising (Cheque No : 9014)

410
130 Dr
30
Sales revenue
590

720 Dr
             The following Bank Statement was received in early July 2020:
Date
Particulars
Payments
Receipts
Balance
2020

$
$
$
Jun     1
 Balance b/d


950 Cr
2
 Direct Deposits - Adil

1 800
2 750 Cr
4
 Cheque 9010
  700

2 050 Cr
11
 Cheque 9011
100

1 950 Cr
15
 Deposit

  130
2 080 Cr
20
 Standing order - Insurance
108

1 972 Cr
21
 Cheque 9014
   410

1 562 Cr
26
 Cheque 9013
  100

 1 462 Cr
30
 Dividends

400
 1 862 Cr
30
 Bank charges
9
 
 1 853 Cr
REQUIRED     
(a)    Update  the  Cash  at  bank  account  on  30 June 2020
(b)   Prepare a statement to reconcile the difference between the updated cash at bank and the 
       balance in the bank statement dated 30 June 2020.                                                                                                                                                                     
To do this question, we follow the step, 
Step 1 : tick the items that appear in both the cash at bank and the bank statement
Step 2 and step 3 is to highlight the items not tick to put into the cash at bank and bank reconciliation.
The question will look like this after step 1 -- step 3
Cash at Bank account
Date
Particulars
Debit
Credit
Balance
  2020

$
$
  $
Jun 1
Balance b/d


950 Dr
2
Kyn
500

 1 450 Dr
4
Utilities (Cheque No : 9010)

700√
750 Dr
8
Nanda (Cheque No : 9011)

100√
650 Dr
12
Ling Li (Cheque No : 9012)

140
510 Dr
15
Nami
130√

640 Dr
19
Aikin(Cheque No : 9013)

100√
540 Dr
21
Advertising (Cheque No : 9014)

410√
130 Dr
30
Sales revenue
590

720 Dr
             The following Bank Statement was received in early July 2020:
Date
Particulars
Payments
Receipts
Balance
2020

$
$
$
Jun     1
 Balance b/d


950 Cr
2
 Direct Deposits - Adil

1 800
2 750 Cr
4
 Cheque 9010
  700√

2 050 Cr
11
 Cheque 9011
100√

1 950 Cr
15
 Deposit

  130√
2 080 Cr
20
 Standing order - Insurance
108

1 972 Cr
21
 Cheque 9014
   410√

1 562 Cr
26
 Cheque 9013
  100√

 1 462 Cr
30
 Dividends

400
 1 862 Cr
30
 Bank charges
9
 
 1 853 Cr
Final completed answer



For more questions to practise on Bank Reconciliation,  please click here More practice questions









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