Bank Reconcilaition

Question 1

Explain the meaning of Outstanding lodgement (amounts not yet credited)

Answer 1

funds (that have been debited) in the cashbook that has not yet been processed by the bank and therfore not yet shown on the bank statement

Question 2

Explain the meaning of unpresented cheque

Answer 2

a cheque drawn (and credited) in the cash book that has not yet been processed by the bank and therefore not on the bank statement

Question 3

Explain 3 benefits of bank reconciliation

Answer 3

enables missing entries in the cash book to be accounted for (1), preventing errors in the financial statements (1)

enables out-of-date cheques to be identified (1) and cancelled in the cash book (1)

acts as a deterrent to fraud (1) due to the bank statement being an independent accounting record prepared by the bank (1)

Question 4

Give 2 limitations of bank reconciliation

Answer 4

Bank reconciliation can be time-consuming and prone to errors if done manually, especially with high volumes of data.

The dates recorded by the bank may be different to the dates in your own record, opening up the possibility of discrepancies and errors occuring

Question 5

Give 2 benefits of suspense accounts

Answer 5

enable a trial balance to be balanced even when there are unclassified or incomplete transactions, allowing the next steps in financial reporting to proceed

Using a suspense account can help identify errors or discrepancies in the accounting records

It provides a temporary holding place for transactions until their correct classification is determined or an error is resolved