Why the cash book and bank statement differ, updating the cash book, and preparing a bank reconciliation statement.
Why the balances differ
The balance in the business's cash book and the balance on the bank statement often disagree because of timing differences and items the business has not yet recorded.
| Reason | Effect |
|---|---|
| Unpresented cheques (paid out, not yet cleared) | bank statement shows more money than cash book |
| Uncredited deposits / lodgements (paid in, not yet cleared) | bank statement shows less money than cash book |
| Bank charges and interest | in statement, not yet in cash book |
| Direct debits / standing orders | in statement, not yet in cash book |
| Credit transfers received | in statement, not yet in cash book |
| Dishonoured cheques | in statement, not yet in cash book |
Viewing only
This content is free to read on superexams.com and cannot be printed or downloaded.
Read the full note, free
Create a free account to read this note in full. Every free account gets 2 complete revision notes, no card needed.