Simple Book-keeping

6. The Bank Statement

Every month compare your bank statement and Cash Book. After any errors are corrected, both balances should be the same.

6.1 Match each entry in the Cash Book with the entry on the statement.

• If you regularly pay batches of cheques into your bank, you need a 'bank' column in the 'money in' section of your Cash Book. This shows the total value of money paid in each day, which will match the figures shown on your bank statement.

6.2 Payments made by direct debit or standing order will not yet be recorded in the Cash Book. Nor will bank charges and interest.

• Enter the details in the Cash Book below the list of entries for cheques which have been written out that month.
• Then tick off the item in the Cash Book and on the bank statement.

6.3 Make sure that every item appearing on the bank statement has been ticked off.

6.4 Some items will not yet appear on the bank statement.

• Money paid in by you but not yet cleared (eg customers' cheques).
• Cheques you have sent to suppliers which have yet to be paid into their accounts.

6.5 Calculate the adjusted bank balance.

• The adjusted bank balance is what the bank balance would be if all the money paid in and all the cheques paid out were shown on the bank statement. It equals the end-of-month balance showing on the bank statement plus money paid in but not on the statement less cheques written, but not on the statement.

6.6 Reconcile the bank statement.

• Write down the adjusted bank balance at the start of the month.
• Add the total sales revenue paid in and other income for the month (taken from your Cash Book).
• Deduct the total payments for the month (taken from your Cash Book).
• This should equal the adjusted bank balance at the end of each month.