Scribd
Upload
26 views3 pages

Bank Reconciliation

Notes

Uploaded by

joybeja56
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
26 views3 pages

Bank Reconciliation

Notes

Uploaded by

joybeja56
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Bank Reconciliation

Bank reconciliation is a crucial accounting process that ensures the accuracy of a company's financial
records by comparing its internal records with the bank's statements. This process helps identify
discrepancies, such as errors or unrecorded transactions, and ensures that the cash balance reported in
the company’s books matches the bank's records.

Key Steps in Bank Reconciliation

1. Gather Documents: Collect the bank statement and the company's cash book or ledger for the
period in question.

2. Compare Deposits: Match the deposits recorded in the company's ledger with those listed in the
bank statement. Identify any deposits that are recorded in the ledger but not yet reflected in the
bank statement (deposits in transit).

3. Identify Outstanding Checks: Check for any checks that have been issued and recorded in the
company's books but have not yet cleared the bank.

4. Adjust Balances: Make necessary adjustments for any discrepancies, such as bank fees or
interest earned that may not have been recorded in the company's books.

5. Reconcile Balances: After adjustments, the adjusted balances from both the bank statement and
the company's records should match.

Example of Bank Reconciliation

Scenario

A company, XYZ Corp, has the following balances:

 Bank Statement Balance: $15,000

 Company Ledger Balance: $16,200

Discrepancies Identified

 Deposits in Transit: $3,000 (recorded in the ledger but not yet cleared by the bank)

 Outstanding Checks: $2,000 (issued checks not yet cleared)

 Bank Fees: $200 (not recorded in the ledger)

Steps to Reconcile

1. Adjust Bank Balance:

 Start with the bank statement balance: $15,000

 Add deposits in transit: $15,000 + $3,000 = $18,000


 Subtract outstanding checks: $18,000 - $2,000 = $16,000

 Adjusted Bank Balance: $16,000

2. Adjust Company Ledger:

 Start with the company ledger balance: $16,200

 Subtract bank fees: $16,200 - $200 = $16,000

 Adjusted Company Ledger Balance: $16,000

Conclusion

After adjustments, both the adjusted bank balance and the adjusted company ledger balance are
$16,000, indicating that the reconciliation is complete and accurate.

Sample Problem

Problem Statement

A company, ABC Inc., has the following information for the month of March:

 Bank Statement Balance: $25,000

 Company Ledger Balance: $27,500

 Deposits in Transit: $5,000

 Outstanding Checks: $3,500

 Bank Fees: $500 (not recorded in the ledger)

Solution Steps

1. Adjust Bank Balance:

 Start with the bank statement balance: $25,000

 Add deposits in transit: $25,000 + $5,000 = $30,000

 Subtract outstanding checks: $30,000 - $3,500 = $26,500

 Adjusted Bank Balance: $26,500

2. Adjust Company Ledger:

 Start with the company ledger balance: $27,500

 Subtract bank fees: $27,500 - $500 = $27,000

 Adjusted Company Ledger Balance: $27,000

Final Comparison

 Adjusted Bank Balance: $26,500


 Adjusted Company Ledger Balance: $27,000

The balances do not match, indicating further investigation is needed to identify additional discrepancies
or errors. Regular bank reconciliation helps maintain accurate financial records, detect errors or fraud,
and manage cash flow effectively.

You might also like