Lesson Note on Bank Reconciliation: Bank Statement Differences and Discrepancies for SSS 2

Class: Senior Secondary School 2 (SS2 / SSS 2)
Term: 1st Term
Week: 8
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Financial Accounting Principles
Previous Lesson: Account of Non-Profit Organization: Accumulated Fund and Balance Sheet.
Topic: REVISIT BANK RECONCILIATION
Subject Matter: Differences between bank statement and reconciliation statement, interpretation of bank statement, causes of discrepancies between cash book and bank statement (dishonoured cheque, un-credited cheque, un-presented cheque, commission, interest, standing order, direct payment)

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

• Explain the differences between a bank statement and a bank reconciliation statement.
• Interpret a bank statement.
• Identify the causes of discrepancies between the cash book and the bank statement.
• Define key terms such as dishonoured cheque, un-credited cheque, un-presented cheque, bank commission, interest, standing order, and direct payment.

Affective Domain:

• Appreciate the importance of bank reconciliation in verifying cash records.
• Develop an accurate approach to identifying and resolving discrepancies in financial records.

Psychomotor Domain:

• Prepare an adjusted cash book to correct errors and omissions.
• Prepare a bank reconciliation statement from given information.

Social Domain:

• Collaborate with peers to discuss and solve bank reconciliation problems.

Reference Materials

The following resources were used in planning this lesson:

• Senior Secondary Schools Education Curriculum
• State Unified Scheme of Work
• ICAN Study Pack for SSCE Financial Accounting
• Any relevant Financial Accounting textbook for Senior Secondary Schools.

Instructional Materials

The teacher will teach this lesson with the aid of:

• Specimen bank documents (e.g., bank statement, cheque book).
• Charts illustrating bank reconciliation formats.
• A resource person (e.g., a bank official or accountant) if available.
• Whiteboard or chalkboard.
• Markers or chalk.

Rationale for the Lesson

This lesson helps pupils understand how to compare their cash records with bank records to ensure accuracy. It teaches them to identify and correct errors, which is important for maintaining reliable financial information for businesses and individuals.

Prerequisite/Previous Knowledge

Pupils should have a basic understanding of cash book entries, bank accounts, and ledger accounts.

Lesson Content/Board Summary

REVISIT BANK RECONCILIATION

1. Interpretation of a Bank Statement

A bank statement is a document issued by the bank to its customer, usually monthly, showing all transactions that have passed through the customer’s account during the period. It shows deposits, withdrawals (cheques paid, direct debits, standing orders, bank charges), and the balance of the account.

2. Differences Between Bank Statement and Bank Reconciliation Statement

A Bank Statement is a record prepared by the bank showing the customer’s transactions and balance as per the bank’s records.

A Bank Reconciliation Statement is a statement prepared by the customer to reconcile (explain) the differences between the balance shown in the cash book and the balance shown in the bank statement on a specific date.

3. Causes of Discrepancies Between Cash Book and Bank Statement

Discrepancies arise due to timing differences or errors. Common causes include:

• Un-presented Cheques: Cheques issued by the business and recorded in the cash book but not yet presented to the bank for payment. The cash book balance is reduced, but the bank statement balance is not.
• Un-credited Cheques (or Cheques Lodged but Not Yet Cleared): Cheques received by the business, recorded in the cash book as deposits, and sent to the bank, but not yet credited to the bank account by the bank. The cash book balance is increased, but the bank statement balance is not.
• Dishonoured Cheques: Cheques previously received and deposited into the bank (and recorded in the cash book), but returned unpaid by the bank for reasons like insufficient funds or irregular signature. The bank statement balance is reduced, and the cash book needs adjustment.
• Bank Charges/Commission: Charges levied by the bank for services rendered (e.g., ledger fees, transaction fees). These are usually debited in the bank statement but not yet recorded in the cash book.
• Interest Allowed: Interest earned on a credit balance in the bank account. This is credited in the bank statement but not yet recorded in the cash book.
• Interest Charged: Interest charged by the bank on an overdraft balance. This is debited in the bank statement but not yet recorded in the cash book.
• Standing Order: An instruction given by the customer to the bank to pay a fixed amount to a named third party at regular intervals. It is debited in the bank statement but may not be known or recorded in the cash book until the bank statement is received.
• Direct Payment/Credit Transfer: Money paid directly into the business’s bank account by a customer or debtor. This is credited in the bank statement but may not be known or recorded in the cash book until the bank statement is received.
• Errors: Mistakes made either in the cash book or by the bank.

4. Adjustment of Cash Book

The cash book needs to be updated for items that the business was unaware of until the bank statement was received. These include:

• Bank Charges (deducted from cash book)
• Interest Allowed (added to cash book)
• Interest Charged (deducted from cash book)
• Dishonoured Cheques (deducted from cash book)
• Direct Payments/Credit Transfers (added to cash book)
• Standing Orders (deducted from cash book)
• Errors made in the cash book (corrected).

Example 1: Adjusting the Cash Book

The cash book (bank column) of XYZ Ltd. showed a debit balance of N12,500 on 31st March 2023. On comparing it with the bank statement, the following were discovered:

1. Bank charges not yet recorded in cash book N250.
2. Interest credited by bank not yet recorded N100.
3. A dishonoured cheque of N1,200.
4. A direct deposit from a customer N3,000.

Solution: Adjusted Cash Book (Bank Column)

Details	N	Details	N
Balance b/d	12,500	Bank Charges	250
Direct Deposit	3,000	Dishonoured Cheque	1,200
Interest Received	100	Balance c/d	14,150
	15,600		15,600

Note: The adjusted cash book balance (Balance c/d) is the new starting point for the bank reconciliation statement.

5. Preparation of Bank Reconciliation Statement

The bank reconciliation statement can be prepared using two main methods:

1. Starting with the adjusted cash book balance and ending with the bank statement balance.
2. Starting with the bank statement balance and ending with the adjusted cash book balance.

Common Format (starting with Adjusted Cash Book Balance):

Bank Reconciliation Statement as at [Date]

Balance as per Adjusted Cash Book (Dr.) ……………… XXX

Add: Un-presented Cheques ……………………………… XXX

Less: Un-credited Cheques ……………………………….. (XXX)

Balance as per Bank Statement (Cr.) …………….. XXX

Common Format (starting with Bank Statement Balance):

Bank Reconciliation Statement as at [Date]

Balance as per Bank Statement (Cr.) …………………. XXX

Add: Un-credited Cheques ……………………………… XXX

Less: Un-presented Cheques …………………………… (XXX)

Balance as per Adjusted Cash Book (Dr.) …………… XXX

Example 2: Preparing Bank Reconciliation Statement

Using the adjusted cash book balance from Example 1 (N14,150) and the following additional information:

1. Cheques issued but not yet presented to the bank for payment (un-presented cheques) N2,500.
2. Cheques lodged into the bank but not yet credited by the bank (un-credited cheques) N1,500.
3. Bank statement showed a credit balance of N15,150.

Solution: Bank Reconciliation Statement as at 31st March 2023

Details	N
Balance as per Adjusted Cash Book (Dr.)	14,150
Add: Un-presented Cheques	2,500
	16,650
Less: Un-credited Cheques	(1,500)
Balance as per Bank Statement (Cr.)	15,150

Note: The final balance matches the bank statement balance, indicating the reconciliation is successful.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 5 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher greets the pupils, reviews the previous lesson, and introduces the topic of revisiting bank reconciliation by asking pupils about the importance of checking bank statements.
Pupils’ Activity: Pupils respond to questions and listen attentively.
Learning Point: Pupils recall prior knowledge and are prepared for the new topic.

Step 2: Interpretation of Bank Statement

Time: 8 minutes
Teaching Skill: Explanation/Illustration
Teacher’s Activity: The teacher explains what a bank statement is, its components, and how to interpret the debit and credit entries using a specimen bank statement or chart.
Pupils’ Activity: Pupils observe the specimen, ask questions, and take notes.
Learning Point: Pupils understand the structure and content of a bank statement.

Step 3: Causes of Discrepancies

Time: 10 minutes
Teaching Skill: Explanation/Definition
Teacher’s Activity: The teacher defines and explains each cause of discrepancy between the cash book and bank statement, such as un-presented cheques, un-credited cheques, dishonoured cheques, bank charges, interest, standing orders, and direct payments.
Pupils’ Activity: Pupils listen, ask clarifying questions, and write down definitions and explanations.
Learning Point: Pupils identify and understand the various reasons for differences in balances.

Step 4: Differences between Bank Statement and Reconciliation Statement

Time: 5 minutes
Teaching Skill: Comparison/Discussion
Teacher’s Activity: The teacher highlights the fundamental differences between a bank statement (from the bank’s perspective) and a bank reconciliation statement (prepared by the customer to explain differences).
Pupils’ Activity: Pupils contribute to the discussion and note the key distinctions.
Learning Point: Pupils differentiate between the two types of statements.

Step 5: Adjustment of Cash Book (Example)

Time: 7 minutes
Teaching Skill: Demonstration/Problem-solving
Teacher’s Activity: The teacher demonstrates how to adjust the cash book for items like bank charges, interest, dishonoured cheques, and direct deposits using Example 1 on the board.
Pupils’ Activity: Pupils carefully follow the steps, ask questions, and copy the example into their notes.
Learning Point: Pupils learn to update the cash book to reflect bank-initiated transactions.

Step 6: Preparation of Bank Reconciliation Statement (Example)

Time: 5 minutes
Teaching Skill: Demonstration/Problem-solving
Teacher’s Activity: Using the adjusted cash book balance, the teacher demonstrates how to prepare a bank reconciliation statement by incorporating un-presented and un-credited cheques, using Example 2 on the board.
Pupils’ Activity: Pupils follow the demonstration, ask questions, and copy the example.
Learning Point: Pupils learn to prepare a bank reconciliation statement to reconcile the cash book and bank statement balances.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. State two differences between a bank statement and a bank reconciliation statement.
2. List three causes of discrepancies between the cash book and the bank statement.
3. Define a “dishonoured cheque.”
4. Explain how “bank charges” are treated when preparing an adjusted cash book.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 2 minutes
Teaching Skill: Summarization/Assignment
Teacher’s Activity: The teacher summarizes the key points of the lesson, emphasizes the importance of regular bank reconciliation, and assigns homework involving a simple bank reconciliation problem.
Pupils’ Activity: Pupils listen to the summary and copy down the homework.
Learning Point: Pupils consolidate their understanding and prepare for further practice.

Lesson Keywords

• Bank Statement – A record issued by the bank showing transactions and balance of a customer’s account.
• Bank Reconciliation Statement – A statement prepared by a customer to explain differences between cash book and bank statement balances.
• Dishonoured Cheque – A cheque returned by the bank unpaid.
• Un-presented Cheque – A cheque issued by the business but not yet paid by the bank.
• Un-credited Cheque – A cheque deposited by the business but not yet cleared or credited by the bank.
• Standing Order – An instruction to the bank to pay a fixed amount regularly.
• Direct Payment – Money paid directly into the bank account by a third party.
• Adjusted Cash Book – A cash book updated with items not previously known to the business.

Differentiation

For struggling learners, the teacher will provide simplified examples and step-by-step guidance, focusing on one discrepancy type at a time. Advanced learners will be given more complex reconciliation problems involving errors and multiple types of discrepancies for independent practice.

Note for teachers using this lesson plan

Teachers should ensure they have clear, legible examples of bank statements and reconciliation statements to display. Emphasize the practical application of bank reconciliation for businesses and individuals. Encourage pupils to work through examples on their own after demonstration to reinforce learning.