Accounting, Reconciliation and Financial Records
Expect questions on the accounting equation, debits and credits, the meaning of assets, liabilities, equity, income and expense, and how a bank's balance sheet differs from a manufacturer's. Know that for a bank, customer deposits are liabilities and loans are assets - a reversal of intuition that examiners love to test. Understand accrual versus cash accounting, provisions, suspense accounts, and the purpose of a trial balance.
Reconciliation is the second half. Know the structure of a bank reconciliation: outstanding cheques, deposits in transit, bank charges, interest credited, and errors on either side. Understand nostro and vostro accounts, interbranch reconciliation, and why unreconciled suspense balances are a control weakness.
Traps include confusing a debit with an increase. A debit increases assets and expenses but decreases liabilities, equity and income. Another trap presents a bank reconciliation and asks for the adjusted book balance rather than the adjusted bank balance.
Rule of thumb: DEAL - Debits increase Expenses, Assets and Losses; credits increase the opposite.
Worked example: Book balance is 50,000. The bank charged 1,200 in fees not yet recorded, and interest of 800 was credited. Adjusted book balance = 50,000 − 1,200 + 800 = 49,600. Items already in the bank statement adjust the book side, not the bank side.