Financial Accounting Report: Bank Reconciliation and Suspense Account

This financial accounting report delves into the intricacies of bank reconciliation statements (BRS) and suspense accounts. It explores the utility of BRS in assessing discrepancies between passbook and cash book balances, crucial for financial control and fraud prevention. The report explains direct debits, standing orders, dishonored checks, and bank charges, highlighting their impact on bank accounts. Additionally, it provides a detailed analysis of error rectification, demonstrating how to correct accounting errors using journal entries and suspense accounts. The conclusion emphasizes the importance of BRS for accurate cash position assessment and the role of suspense accounts in trial balance matching and financial statement preparation, offering a practical guide to financial accounting principles.

Financial Accounting

TABLE OF CONTENTS
PROJECT 2......................................................................................................................................3
QUESTION 1...................................................................................................................................3
Bank Reconciliation statement....................................................................................................3
a...................................................................................................................................................3
QUESTION 2...................................................................................................................................4
REFERENCES................................................................................................................................6

PROJECT 2
INTRODUCTION
Financial accounting rules and principles help in tracking or evaluating monetary transactions of
a business. In the recent times, companies undertake specific guidelines for preparing, presenting
and publishing final accounts at the end of an accounting year. In this, report will provide deeper
insight about the manner in which bank reconciliation statement helps in assessing the reasons
due to which differences take place in the balances of pass and cash book. Besides this, report
also exhibits the significance of suspense account in the context of trial balance preparation.
QUESTION 1
Bank Reconciliation statement- It has been defined as the summary of banking and business
activities that makes up the entity's book of bank account with the financial records. This
statement mainly focuses on the deposits, withdrawals and various other activities that impacts a
bank account for a specific period. It is one of the very useful financial tool used to control the
thwart fraud. BRS ensures the payments which has been processed and the collection of cash
which has been deposited in bank. It is useful in identifying the difference between the bank
balance and the balance of book in order to make the necessary adjustments and corrections. An
organisation's cash balance at bank and cash at hand according to the proper accounting record
do not match. Therefore, BRS is formed in order to make a proper match of both the balances.
Adjusting balance per books- The balance of the cash account in the financial records of a firm
requires the proper adjusting. A bank may charge fees for opening the account. Basically the
bank withdraws the fees automatically from the bank account. When, preparing BRS the
deductions from the account must be accounted in order to prepare a journal entry.
Particulars
Figures (in
£) Figures (in £)
Balance as per cash book (Dr) 1760
add:

Cheque issued to D Park but not presented for the payment 270
Payment transferred by Mr. Petal in Akram’s bank 1070
Withdrawal for personal use 105
Dividend collected by the bank 325 1770
3530
Less:
Insurance paid by Tesco to bank in against to fire 170
Monthly talk talk bill paid by bank 56
Cheque is not credited in the bank statement 186
Bank charges 25
437
Balance as per pass book (Cr) 3093
1a.
DIRECT DEBIT – It is an real time withdrawal system in which you can permit
individual to take money from your bank account on the behalf of you as when payments
become due. But the payer is liable to inform in advance for the timing and the amount of the
withdrawals. The finance providing owner orders bank to fulfill the appeal done by the payee.
For ex – gas bills, electricity bills, telephone bills etc.
STANDING ORDERS- Standing order is provision for the banks in which you can order
bank to transmit the certain amount of your bank account at fix interval (Cucchiella and Rosa,
2015.). In standing order the payer has all the right to cancel the payments without giving any
information to the payee. For ex – lease, Insurance premium,offerings Equated Monthly
Installments (EMI), etc.
DISHONOURED CHEQUE- at the time of giving cheque for a payment the bank should
pay the mentioned amount to the payee the cheque is known as honoured. But if the bank denies
to pay the amount stated in the cheque, then it is known as dishonoured cheque . This could be
happen because of insufficient fund, irregular signature, alteration, post dated cheque, stale
cheque , frozen amount is there.
BANK CHARGES- Bank charges are those charges made by the banks to their customers
like monthly charges for provision account, charges for specific transaction etc . It is a applied
on a bank holders account.

DIFFERENCE BETWEEN DIRECT DEBIT AND STANDING ORDER IS LISTED BELOW
1- Direct debit is a monetary transaction in which payee has right to withdraw from payers
account while standing orders are those orders instructed to the bank by the organizations to
maker regular payments in the place of the customers.
2- in standing order only payer is having a control over payments (Ahn, 2014) while in direct
debit payee has havin a complete control on the payments.
3- In direct debit amount of the undertakings can change from time to time while in standing
orders amount of the transaction are fixed. They do not fluctuate.
4- in standing order all the intervals of withdraws are predefined while in direct debit , they are
not defined .
5- The administration charges are less in direct debit than in standing orders.
6- An automated system that provide payee for the cancellation by the direct debit system .while
on standing order no option is provided for the notification..
THERE IS ONLY ONE MAJOR DIFFERENCE BETWEEN BANK CHARGES AND
DISHONOURED CHEQUE -
The main difference between bank charges and dishonored cheques is that one is crime and
other is offence. If your cheque is dishounred by the bank, the bank may apply charges for that.
QUESTION 2

Rectification of errors:
Date Particular L.F. Debit Credit
1. Purchase
To musa
2000
2000
2. Cash
To bank
To suspense
1340
670
670
3. G Tahir
To suspense
650
650
4. Electricity bill expense
To suspense
790
790
5. Motor vehicle expense account
To cash
500
500
Cash
To motor vehicle account
500
500
6. Sales
To suspense
270
270
7. L Samantha
To cash
190
190
8. Suspense
To D John
384
384
Suspense account
To D Jhon 384 To cash 670
To bal c/f 1976 To sales 650
To electricity bill 790
To sales 270

2380 2380
CONCLUSION
In conclusion to this report, it can be presented that BRS helps in getting information about
appropriate cash position to a great extent. In addition to this, it can be depicted from the
evaluation that suspense account helps in matching the balances of trial balance and gives input
for financial statement preparation.

REFERENCES
Books and Journals
Ahn, J., 2014. Understanding trade finance: theory and evidence from transaction-level data.
Unpublished. International Monetary Fund.
Cucchiella, F. and Rosa, P., 2015. End-of-Life of used photovoltaic modules: A financial
analysis. Renewable and Sustainable Energy Reviews, 47, pp.552-561.