I am really passionate about accounting.
These notes will really help you to understand the theory behind the work that you are doing. It will enable you to see the bigger picture, and surely improve your grades.
Happy studying!
Chapter 3 –
reconciliations:
bank
reconciliations
LEARNERS SHOULD BE ABLE TO:
Reconcile bank statements with cash journals in order to prepare bank
reconciliation statements:
• Outstanding deposits
• Cheques not yet presented for payment
• Stop/debit orders
• Direct transfers
• Bank charges
• Interest received or charged
• Correction of errors or omissions
• Cheques R/D or cancelled
• Post-dated cheques received and future dated EFT’s
Reconcile statements received form creditors with accounts in
creditor’s ledger of a business in order to prepare creditors’
reconciliation statements:
• Outstanding invoices or credit notes
• Outstanding payments
• Discounts not recorded
• Correction of errors or omissions
• Integration of issues of internal control
• Integration of ethical issues relating to the banking environment
, Bank reconciliations:
Involves comparing the business’s
records of transactions and balances
to the bank’s record of transactions
and balances
Why are bank reconciliations important?
If reconciliations are not done, the business may be exposed to several risks. People or
employees may be stealing from their bank account. If not reconciled, the business will
never know about it. The bank might have made a mistake. With regular bank
reconciliations, problems can be picked up quickly and mistakes are corrected.
Internal control of money
In order to comply with accounting controls, a business MUST record all cash receipts and
cash payments. A business should also comply with the following accounting control
procedures:
Ensure that all money received is supported by a source document.
Check that the money and cheques received agree with the deposit slip.
Require cheques to be signed at least by 2 authorized signatories.
Prefer to make all payments by cheque or EFT.
Accounting procedure for recording money received
When money is received, the business will issue a receipt, cash invoice or till slip. The
source document is recorded in the CRJ. At the end of the day, all amounts in the Analysis
of receipts column in the CRJ are added together. The amount represents all the money
received on that particular day and will be entered into the Bank column. The amount in
the Bank column is deposited. This amount must appear on the deposit slip.
Accounting procedures for recording money paid
When a payment is made, it is recorded in the CPJ. The business could make use of a
cheque, credit/debit card, or EFT to make a payment.
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