S6: ICT in Accounting

     Key unit competence: Prepare the bank reconciliation using 

                                                      QUICKBOOKS

Introductory Activity

KANYANA is hired as an account clerk at IGIHOZO super market. At the end 
of the month she finds that there is disagreement between the bank account 
balance in cash book and the bank account balance on the bank statement. 

a) What do you thing are the reasons behind those discrepancies?
b) What do you suggest as an answer for those discrepancies to 
      ensure that the balance to be reported in financial statement is 

      true and fair?

8.1. Meaning of Bank reconciliation

Reconciling a bank statement is an important step to ensuring the accuracy of 
financial data. To reconcile bank statements, carefully match transactions on the 
bank statement to the transactions in accounting records. With QuickBooks, 
the user can easily reconcile bank accounts to ensure that the amount record is 

consistent with the amount reported by the bank.

Learning Activity 8.1.

The businesses prepare the cash book to record all receipts and payments 
concluded either by cheque or by cash. At the end of and financial period, 
this record is compared to the statement of the account by checking the bank 
column.

What is the document that the business uses to match the two documents?

The cashbook for cash at bank records all the transactions taking place at 
the bank i.e. the movements of the account held with the bank. The bank will 
send information relating to this account using a bank statement for the firm to 
compare.
 
Ideally, the records as per the bank and the cashbook should be the same and 
therefore the balance carried down in the cashbook should be the same as the 
balance carried down by the bank in the bank statement. 

In practice however, this is not the case and the two (balance as per the bank 
and firm) are different. A bank reconciliation statement explains the difference 
between the balance at the bank as per the cashbook and balance at bank as 

per the bank statement. 

8.2. The Purposes and causes of a bank reconciliation

          statement

1. What is the meaning of bank statement?
2. List the two document involved in preparation of bank reconciliation 

    statement.

The bank reconciliation statement is prepared for the reasons below:

To update the cashbook with some of the items appearing in the bank statement 

         Learning Activity 8.2.

The accountant of any business has to ensure that the additions and 
deductions on the bank statement are compared (or reconciled) with the items 
that are entered in company's general ledger, if there are differences, such 
as outstanding payments or deposits in transit, they can be noted as timing 
differences. 
1. How do you think the accountants can deal with this situation?

2. Who do you think is committing the errors that cause the differences?

e.g. bank charges, interest charges and dishonored cheques and make 
adjustments for any errors reflected in the cashbook. 
To detect and prevent errors or frauds relating to the cashbook. 
To detect and prevent errors or frauds relating to the bank. 

8.2.2. Causes of the differences

The causes of differences are the following:
Items appearing in the cashbook and not reflected in the bank statement. 
The following are the causes of imbalance between cash books and bank 
statement
Unpresented Cheques: Cheques issued by the firm for payment to the 
creditors or to other supplies but have not been presented to the firm’s bank for 
payment. 
Uncredited deposits/cheques: These are cheques received from customers 
and other sources for which the firm has banked but the bank has not yet availed 
the funds by crediting the firm’s account. Errors made in the cashbook. These 
include: 
Payments over/understated 
Deposits over/understated 
Deposits and payments miss posted 
Overcasting and under casting the Bal c/d in the cashbook. 
Items appearing in the bank statement and not reflected in the 
cashbook.
The items that appear in bank statement but not reflected in cash book ere: 
Bank charges: These charges include service, commission or cheques. 
Interest charges on overdrafts. 
Direct Debits (standing orders) 
Dishonored cheques 
Direct credits 
Interest Income/Dividend incomes
Errors of the Bank Statement (Made By the Bank). 

Such errors include: 
– Overstating/understating. 
– Deposits 

– Withdrawals 

8.3. Steps of reconciliation in QuickBooks 
8.3.1. Import transactions

QuickBooks has to be connected to the bank, for importing transactions relating

 Application Activity 8.2.

1. What is Bank reconciliation?
2. Complete the following sentences:
      a) ……………………………… are cheques issued by the firm for 
           payment to the creditors or to other supplies but have not been 
           presented to the firm’s bank for payment.
     b) The cheques received from customers and other sources for which 
the firm has banked but the bank has not yet availed the funds by 
crediting the firm’s account are called ………………………………….
3. In which cases the bank can dishonor a cheque? Mention at least 4 
    cases.
4. It is normal that the bank makes some mistakes that leads to the difference 

     between cash book and bank statement. List three of these mistakes.

to the bank. When the user receives the bank statement or account statement 
at the end of the month, he can start reconciling the accounts. QuickBooks 

organizes all data for making bank reconciliation easily.

     Learning Activity 8.3.

To reconcile the bank balance as shown in the bank statement (pass book) 
with the balance shown by the cash book, Bank Reconciliation Statement is 
prepared. After identifying the reasons of difference, the Bank Reconciliation 
statement is prepared without making change in the cash book balance.

You are required to discuss the process in which the bank reconciliation 

statement should be prepared.

8.3.2. Reconcile accounts

To reconcile the accounts, the user clicks on Reconcile icon on QuickBooks 

Home Page. It gives the following window. 

             

           Through this window, the user selects the account to be reconciled by clicking 

           on the account field. A list of account appears.

             

                  In QuickBooks, choose the account to reconcile. 

              

               The bank account is selected to be reconciled, the window below appears:
           

              From this window, the user fills the required field including selection of date 
              at which the reconciliation is taking place, Beginning and Ending balance, 
              Service charge and the Account which is charged, Interest earned if any 

              and the Account that receives the interest.

             

     After filling these fields, the user can click on Continue
     QuickBooks will let the user check data on his bank account and asks to 
     reconcile.
     
    Before reconciliation, the user will make sure that all transactions are selected 

    by clicking on Mark All.

        

          With bank statement in-hand, the user can systematically check off matching 
           transactions one-by-one by clicking their boxes. 

          The bottom of the screen contains a running total of items checked off, and 
          thus have been reconciled. This is useful for comparing the totals in books to 
         the totals on bank statement. To complete the reconciliation, make sure the 

          difference shown is zero.

            

               Here, a click on reconcile Now, QuickBooks gives to the user an option to 
               Display the reconciliation report. The user can also choose the type of report 

               to display being either Summary, Details or Both.

                Let’s display a Details report here under:

             

              If the user selects to display the summary reconciliation, it appears as follow:   

           

            Sometime the user can reconcile and there is a remaining difference which is 
             not zero.

              Application Activity 8.3.

     Form the information below, prepare and display the bank reconciliation 

      Details period ending at 31/01/2023

            

  End of Unit Assessment

1. What is meant by a Bank Reconciliation statement? 
2. What is the need of preparing Bank Reconciliation statement? 
3. Enumerate the causes of difference in the balance of cash book and 
     bank statement.
4. From the following particulars, prepare Bank Reconciliation statement 
      as on December 31, 2022. 
      Opening bank balance: FRW 42,000
      Ending balance:

The ending balance is a result of the transactions below:
i) Starting business with FRW 1,000,000 at bank
ii) Purchase of goods by cheque: FRW 550,000 FRW
iii) Sales by cheque: FRW 765,000
iv) Interest earned: FRW 90,150
v) Commission paid: FRW 12,490

vi) Interest charges: FRW 4,215