Bank Reconciliation and Control Accounts
Bank reconciliation explains the difference between the bank account in the cash book and the bank statement. Control accounts summarise the receivables and payables ledgers and help locate errors.
Bank reconciliation
Start with the cash book balance and adjust for items on the statement not yet in the cash book: bank charges, interest, standing orders, direct debits, dishonoured cheques and bank errors. Then reconcile to the statement using unpresented cheques and lodgements not yet credited.
Worked example
Cash book shows a debit balance of €2,450. Bank charges of €30 and a standing order of €100 are not yet recorded. Adjusted cash book balance = €2,450 - €30 - €100 = €2,320. Unpresented cheques are €260 and lodgements not credited are €400. Bank statement balance = €2,320 + €260 - €400 = €2,180.
Control accounts
Receivables control: opening debit balance + credit sales - receipts - sales returns - discounts allowed = closing debit balance. For example, 12,000 + 45,000 - 40,000 - 1,000 - 500 = €15,500.
Traps
Adding bank charges instead of deducting them; treating a dishonoured cheque as a lodgement; putting unpresented cheques on the wrong side; and omitting contra entries between receivables and payables control accounts. Always adjust the cash book before reconciling the statement.