Principles of Accounting: Bank reconciliation statement and bank overdraft

////Principles of Accounting: Bank reconciliation statement and bank overdraft

Principles of Accounting: Bank reconciliation statement and bank overdraft

ZIMSEC O Level Principles of Accounts Notes: Bank reconciliation statement and bank overdraft

  • Preparing a bank reconciliation statement is easy
  • In the last example we assumed that the business had a positive balance shown by a a debit bank balance in the bank column of the cash book and a credit balance on the bank statement
  • In reality this is not always the case
  • It is qui
  • In order to improve its cash flow the business may negotiate with the bank for an overdraft facility
  • This is a form of short term borrowing that would allow the business to overdraw its account
  • In such instances it would mean that:
  • The bank balance would be shown as a credit balance in the cash book
  • From the bank’s perspective this would be a debit balance
  • This is usually denoted by a negative balance on the bank statement in modern days
  • In other instances an overdraft is shown by the acronym O/D besides the bank balance figure on the bank statement
  • Currently at the time of writing this it is possible in Zimbabwe it is possible to “overdraw” your
  • Banks do not offer interest on current and savings accounts which means one’s account can have a negative balance due to service charges if no deposits are made

Bank reconciliation statement

  • The procedure to prepare a bank statement is not very different from the one where the business has a positive bank balance
Cash Book
5 OctoberJ Bavhadeyixxx1 OctoberBalance b/dxxx
23 OctoberK Mutengixxx16 OctoberS Kubikaxxx
31 OctoberBalance c/dxxxx



  • Apart from the credit balance this looks like the normal updated cash book
  • The presentation and format of the bank reconciliation statement is rather different arithmetically speaking
Bank Reconciliation Statement as at 31October 20X8 
Overdraft as per Cash Book(xxx)
Add Unrepresented cheques


Less uncredited lodgments(xxx)
Overdraft/Balance as per bank statement


  • When dealing with overdrafts be mindful of the negative and positive amounts and handle them apropriatly
  • It is very possible for a balance to transition from either an overdraft to a positive balance and vice versa
  • There are alternative formats of presenting the bank reconciliation statement but we will assume you will use this
  • An example of a bank reconciliation statement with a bank overdraft can be found here

To access more topics go to the Principles of Accounting Notes.


By | 2017-09-26T09:19:35+00:00 September 26th, 2017|Notes, Ordinary Level Notes, Principles of Accounts Notes|0 Comments

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He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.

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