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9706 · 1.4.3

Bank reconciliation statements — practice questions

Practice and worked examples for 9706 Bank reconciliation statements. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

On 31 May, a business's cash book showed a bank balance of $5,280. The bank statement on the same date showed a balance of $6,145. The following discrepancies were found:

  1. Bank charges of $55 had not been entered in the cash book.
  2. Cheques issued to suppliers totalling $1,320 were unpresented.
  3. A deposit of $400 made on 31 May was not yet credited by the bank.

Prepare the updated cash book extract and a bank reconciliation statement as at 31 May.

Show solution outline

Step 1 — Update the Cash Book We must record the bank charges that are on the statement but not yet in our books.

Cash Book (Bank Column)

Details$Details$
Balance b/d5,280Bank charges55
Balance c/d5,225
5,2805,280

The updated cash book balance is $5,225. This is the figure that would be shown in the Statement of Financial Position.

Step 2 — Prepare the Bank Reconciliation Statement We will use the format that starts with the updated cash book balance.

Bank Reconciliation Statement as at 31 May | | ∣ | | :--- | ---: | | Balance as per updated cash book | 5,225 | | Add: Unpresented cheques | 1,320 | | | 6,545 | | Less: Uncredited deposits | (400) | | Balance as per bank statement | 6,145 |

This matches the balance on the bank statement, so the accounts are reconciled.

Worked example 2

On 30 June, the cash book of Phoenix Ltd has a debit balance of $1,200. The bank statement for the same date shows a credit balance of $2,050. Upon investigation, you find the following:

  1. Bank charges of $300 are on the bank statement but not in the cash book.
  2. Interest received of $100 has been credited by the bank but not entered in the cash book.
  3. Cheques paid to suppliers amounting to $1,500 have not yet been presented for payment.
  4. A deposit of $450 made on 30 June does not appear on the bank statement.

You are required to: (a) Prepare the updated Bank account in the cash book. (b) Prepare a bank reconciliation statement as at 30 June.

Show solution outline

(a) Updated Cash Book (Bank Account) First, we update the cash book for items the business was unaware of.

Details$Details$
Balance b/d1,200Bank Charges300
Interest Received100Balance c/d1,000
1,3001,300

The updated cash book balance is **1,000∗∗.1,000**.

(b) Bank Reconciliation Statement as at 30 June Now we reconcile the updated cash book balance with the bank statement balance using the timing differences.

Method 1: Starting with Cash Book Balance | | ∣ | | :--- | ---: | | Balance as per updated cash book | 1,000 | | Add: Unpresented cheques | 1,500 | | | 2,500 | | Less: Uncredited deposits | (450) | | Balance as per bank statement | 2,050 |

Method 2: Starting with Bank Statement Balance (Alternative) | | ∣ | | :--- | ---: | | Balance as per bank statement | 2,050 | | Add: Uncredited deposits | 450 | | | 2,500 | | Less: Unpresented cheques | (1,500) | | Balance as per updated cash book | 1,000 |

Both methods prove that the balances reconcile.

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