Balancing the Books: Bank vs. Cashbook
You will often find that, at any given date, the bank balance according to your cashbook is different to the balance on your bank statement. This is primarily due to the time delay between entering the transaction in the cashbook and the time taken to clear the bank – usually 2-3 days depending on the nature of the transaction, i.e. cheque, direct debit, etc. It could also be down to the date on which a supplier banks your cheque, as this may not be immediate (if at all!).
It would be beneficial for your business to carry out a quick reconciliation of your cashbook and bank account, at the end of each month or quarter (for example), to determine if they agree. If any discrepancies have arisen, you may need to investigate these further. This will ensure that your cashbooks are always accurate, making account preparation easier and less time consuming.
Please see the example below:
Cashbook Reconciliation
| Balance at beginning of period | 2011.00 |
| Add: Total cashbook bankings | 2100.00 |
| Less: Total cashbook payments | (1800.00) |
| |
| Balance at end of period | 2311.00 |
Bank Reconciliation
| Balance on bank statement at end of period | 2000.00 |
| Add: Outstanding bankings | 500.00 |
| Less: Outstanding cheques (Issued before the end of the month, but not yet presented to bank) | |
| Cheque No: Amount | |
| 002012 60.00 | |
| 002014 38.00 | |
| 002015 12.00 | |
| 002018 79.00 | (189.00) |
| Balance at end of period | 2311.00 |
If the above reconciliations have been completed and there is a discrepancy between the two balances, you may need to examine the following:
- Addition errors
- Incorrect figures entered, e.g. reversal of numbers
- Direct debits or standing order payments not recorded
- Bankings or giro credits not recorded
- Any outstanding cheques from the previous period
- Cheques not recorded
- Duplicate bankings or payments
Here at Green and Co we offer assistance in all aspects of bookkeeping. For further help or guidance please contact us.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net
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