INTRODUCTION:
When you receive your bank statement each month, you will notice that the ending balance per the bank statement does not match the ending balance per the general ledger's cash account.For example, checks written and recorded in the general ledger on the last day of the month did not clear the bank until the third or fourth day of the following month.If it does not agree it means that either some cash transactions have been omitted from the cash book or an amount of cash has been stolen or lost. The reason for the difference is ascertained and cash book can be corrected. the bank balance as shown by the cash book and bank balance as shown by the bank statement seldom agree.a statement is prepared called bank reconciliation statement to find out the reasons for disagreement between the bank statement balance and the cash book balance of the bank.
some differences may occur in reconciliation statement such as :
Adjusting the Balance as per Bank
1-outstanding checks:
Outstanding checks represent checks written by the business and recorded in the general ledger but not cleared by the bank.
2-Deposits in Transit:
When deposits are made at the end of the month, the bank may not post the deposit to your account until the next month.
3-Bank errors:
These mistakes made by the bank.Bank errors could include the bank recording an incorrect amount, entering an amount that does not belong on a company's bank statement, or omitting an amount from a company's bank statement.
Adjusting the Balance per Books
1-Bank service charges:
The fees deducted from the bank statement for the bank's processing of the checking account activity .
2- NSF check & fees:
An NSF check is a check that was not honored by the bank of the person or company writing the check because that account did not have a sufficient balance. As a result, the check is returned without being honored or paid.
so the the Bank Reconciliation Statement explains the difference between cash reported on bank statement and cash balance in depositors accounting records.
When you receive your bank statement each month, you will notice that the ending balance per the bank statement does not match the ending balance per the general ledger's cash account.For example, checks written and recorded in the general ledger on the last day of the month did not clear the bank until the third or fourth day of the following month.If it does not agree it means that either some cash transactions have been omitted from the cash book or an amount of cash has been stolen or lost. The reason for the difference is ascertained and cash book can be corrected. the bank balance as shown by the cash book and bank balance as shown by the bank statement seldom agree.a statement is prepared called bank reconciliation statement to find out the reasons for disagreement between the bank statement balance and the cash book balance of the bank.
some differences may occur in reconciliation statement such as :
Adjusting the Balance as per Bank
1-outstanding checks:
Outstanding checks represent checks written by the business and recorded in the general ledger but not cleared by the bank.
2-Deposits in Transit:
When deposits are made at the end of the month, the bank may not post the deposit to your account until the next month.
3-Bank errors:
These mistakes made by the bank.Bank errors could include the bank recording an incorrect amount, entering an amount that does not belong on a company's bank statement, or omitting an amount from a company's bank statement.
Adjusting the Balance per Books
1-Bank service charges:
The fees deducted from the bank statement for the bank's processing of the checking account activity .
2- NSF check & fees:
An NSF check is a check that was not honored by the bank of the person or company writing the check because that account did not have a sufficient balance. As a result, the check is returned without being honored or paid.
so the the Bank Reconciliation Statement explains the difference between cash reported on bank statement and cash balance in depositors accounting records.
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