1. To update the cashbook with some of the items appearing in the bank statement e.g. bank charges, interest charges and dishonored cheques and make adjustments for any errors reflected in the cashbook.
2. To detect and prevent errors or frauds relating to the cashbook.
3. To detect and prevent errors or frauds relating to the bank.
Steps in preparing a bank reconciliation statement
1. To update the cashbook with the items appearing in the bank statement and not appearing in the cashbook except for errors in the bank statement. Adjustments should also be made for errors in the cashbook.
2. Compare the debit side of the cashbook with the credit side of the bank statement to determine the uncredited deposits by the bank.
3. Compare the credit side of the cashbook with the debit side of the bank statement to determine the unpresented cheques.
4. Prepare the bank reconciliation statement which will show:
- Unpresented cheques
- Uncredited deposits
- Errors on the bank statement
- The updated cashbook balance.
