Bank Reconciliation

Abstract

When the cashier of a firm makes out a cheque to send off to one of the firm’s creditors he enters the amount of the payment in the credit column of his cash book, thereby reducing the bank balance according to the cash book. Actually, the firm’ balance at the bank will not be affected by this particular cheque is presented for collection. The time lag is due to postal delay, in particular the second-class post, further delay in making out the paying-in book and handing over its contents for collection, and again, at least another day’s delay for the creditor’s bank to ‘clear’ the cheque and obtain payment from the debtor’s bank.