Accounts Part 3

• Bank Statement


  A computerized account sheet copied in running balance by a bank from the account of a customer and sent to the customer at regular intervals
• Information shown on a bank statement

  • Beginning and closing balances
  • Withdrawals from the account (debit)
  • Payments made into the account (credit)
  • Bank charges for overdrafts (debit)
  • Direct debit
  • Interest earned (credit)
  • Standing orders (debit)
  • Service charges (debit)
  • Credit transfer (credit)
• Opening balance


  If it is a debit balance it means overdrafts at the beginning of the month and a credit balance means balance at the beginning of the month
• Debit entries


  Represent money deducted from the customer's account
• Credit entries


  Represent money added to the customer's account
• Closing balance


  If it is a debit balance it means overdraft at the end of the month and credit balance means balance as at the end of the month
• Standing order


  Authorization by the account holder to make a fixed payment on certain dates to an organisation
• Service charge


  Bank charge for administering the account
• Interest paid


  If the account is overdrawn the bank may deduct interest on the amount outstanding
• Interest received


  The bank may pay a small amount of interest on an account depending on the size of the balance
• Credit transfers


  Money can be transferred from one bank account to another without writing out several cheques
• Insufficient funds (nsf)


  A cheque that has been presented at the bank, but the amount written on it exceeds the available balance in the account. It is also marked 'RD' Refer to Drawer
• Reconciling bank and cash book balances

  1. All monies paid into and withdrawn from the business's bank account should be recorded in the cash book

  2. Receipts are posted on the left-hand (debit) side and payments on the right-hand (credit) side

  3. Care needs to be taken to ensure that the dates on the cheques are correct, the amounts in words and figures agree, the payee's name is correct, cheques are signed and any alterations shown on the cheque are signed
• Procedures for reconciling the bank statement and the cash book balances


  1. Check each entry in the cash book against the entries on the bank statement so that those which do not appear in both can be easily seen

  2. Outstanding cheques - cheques that have been written but have not cleared the bank yet

  3. Outstanding deposits/bank lodgements - deposits made and recorded in the cash book but have not cleared the bank

  4. Update the cash book by recording entries that were not ticked off on the bank statement

  5. Draw up the bank reconciliation - starting with cash book balance or bank statement balance