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Chapter 12: Bank reconciliations

book balance vs bank balance

The UK trade deficit widened to 1.8% of gross domestic product (GDP) in 2018, from 1.2% in 2017, its highest since 2010. As Figure 3 shows, this was due mainly to the UK’s trade surplus with non-European Union (non-EU) countries narrowing to 1.3% of GDP (from 1.9% in 2017) – its narrowest since 2012. The UK’s trade deficit with EU countries remained unchanged in 2018 at 3.1% of GDP. If you owe the existing bank or building society any money and you wish to close the account, you may still be sued for the money you owe if you don’t pay it when you close the account. The information should be given to you in a way which is easy for you to understand. Once you’ve opened your account, the bank or building society should tell you about any changes to terms and conditions at least two months before the changes are made.

Again, VAT may not be applicable in some cases e.g. if a supplier is not VAT registered. In this instance, the full payment amount would be entered into the Cash Purchases account column or other relevant column. We can see from our example that we have 4 payments for credit suppliers and 1 payment to a cash supplier.

Debits and credits in the Balance Sheet

For cash customers, this will be the first time the receipt (cash sale) has been entered into our accounting records, so we DO need to analyse the receipt for VAT. In this instance, the full receipt amount will be entered into another relevant column. You will note that we have an entry in the ‘Sundry account’, the reason being that the sales receipt does not relate to the main trade of the business e.g. bookkeeping for startups it could have related to the repayment of a staff loan. It’s worth noting that businesses may choose to use a variety of analysis columns for cash sales e.g. you could have a sales column for individual products or separate departments within the business and so on. We can see from our example that we have 3 receipts from credit customers, 1 receipt from a cash customer and one other sundry receipt.

book balance vs bank balance

The month-end close process involves reconciling all financial transactions, including bank transactions, to ensure that the company’s financial records accurately reflect its financial position. List all the transactions that have been processed by your bank but not yet recorded in your accounting records. This could include deposits, withdrawals, bank fees, and interest paid. Pull up bank reconciliation from each month end and compare the statement line balance to your physical bank statement to see which month the difference appeared in. You’ll have less transactions to look through when you take it month by month.

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This will include the practice expenses per the budget, the partner’s drawings, tax, repayment on loans and also cost of purchasing any equipment. You should record the outgoings when they will happen e.g. partner’s tax is only paid in january and july. Also include the total amount for the outgoing e.g. paying a loan, the budget should only include the interest cost of a loan, but the cashflow will show the monthly payment. This bulletin gives an analytical overview of the main components of the current account, focusing on the components of primary income and trade.

If you’re a client of ours, and you’ve been through these steps without success – do get on to us for support. If you’re interested in discovering more about the difference between available balance and ledger balance, or any other aspect of your business and its finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments. This difference is important to understand because you should usually only make payments according to how much is in your ledger balance.

Accounting Software

List 5 possible causes of differences between the Cash Book bank account balance and the balance shown on the bank statement. You don’t want your cheque or payment to bounce on an important customer. And your team doesn’t want to have to deal with calls from irate suppliers. A bank reconciliation will ensure you know exactly which payments have been released. The bankstatement records all the bank’s transactions with the business. The contents of the cash book should be exactly the same as the record provided by the bank in the form of a bank statement, and therefore the business’ records should correspond with the bank statement.

The account holder may, in many cases, learn of such a direct deposit only on receipt of their monthly statement. A difference between the book balance and the G/L balance may indicate that there are unposted G/L batches. To ensure that the book balance and the G/L account are reconciled, you need to create any outstanding G/L batches , and then post the batches in General Ledger. In the footer of the report, you can select from filter lists to refilter report data.