This document discusses bank reconciliation. It begins by listing the learning objectives, which are to understand different deposit types, bank reconciliation, why it is necessary, reconciling items, reconciliation methods, and the reconciliation process. It then defines types of deposits, bank reconciliation as reconciling book and bank balances, and reconciling items as errors, outstanding checks, and deposits in transit. Finally, it outlines the steps to prepare a reconciliation, which are to determine beginning balances, identify reconciling items, make adjustments, and ensure adjusted balances agree.
This document discusses bank reconciliation. It begins by listing the learning objectives, which are to understand different deposit types, bank reconciliation, why it is necessary, reconciling items, reconciliation methods, and the reconciliation process. It then defines types of deposits, bank reconciliation as reconciling book and bank balances, and reconciling items as errors, outstanding checks, and deposits in transit. Finally, it outlines the steps to prepare a reconciliation, which are to determine beginning balances, identify reconciling items, make adjustments, and ensure adjusted balances agree.
This document discusses bank reconciliation. It begins by listing the learning objectives, which are to understand different deposit types, bank reconciliation, why it is necessary, reconciling items, reconciliation methods, and the reconciliation process. It then defines types of deposits, bank reconciliation as reconciling book and bank balances, and reconciling items as errors, outstanding checks, and deposits in transit. Finally, it outlines the steps to prepare a reconciliation, which are to determine beginning balances, identify reconciling items, make adjustments, and ensure adjusted balances agree.
This document discusses bank reconciliation. It begins by listing the learning objectives, which are to understand different deposit types, bank reconciliation, why it is necessary, reconciling items, reconciliation methods, and the reconciliation process. It then defines types of deposits, bank reconciliation as reconciling book and bank balances, and reconciling items as errors, outstanding checks, and deposits in transit. Finally, it outlines the steps to prepare a reconciliation, which are to determine beginning balances, identify reconciling items, make adjustments, and ensure adjusted balances agree.
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Chapter 2
BANK RECONCILIATION
Mrs. Lucia A. Suello, CPA, MBA
CHAPTER 2 BANK RECONCILIATION LEARNING OBJECTIVES: 1. Know the different types of deposit. 2. Discuss what is a bank reconciliation. 3. Explain why it is necessary to have a bank reconciliation. 4. Identify what are the book reconciling items and bank reconciling items. 5. Differentiate the three method of preparing bank reconciliation. 6. Enumerate the steps in making a bank reconciliation. 7. Prepare a bank reconciliation under the three methods. Imprest System
A system of cash control which
requires all cash receipts should be deposited intact & all cash disbursements should be made by means of check. What are the different types of deposit?
Saving deposit
Time deposit
Checking//current/demand deposit account What is a Bank Reconciliation? A schedule explaining any differences between the balance shown in the bank statement and the balance shown in the cash book or cash ledger. A statement that brings into agreement the balance shown on the bank statement and the balance per book. The goal of this process is to ascertain the differences between the two, and to book changes to the accounting records as appropriate. Objective of Bank Reconciliation • To reconcile the difference between: – the cash book balance, i.e. the business' record of their bank account, and – the bank statement balance, i.e. the bank's record of the company’s bank account. What is a Bank Statement? Report released (on a fixed date every month) by banks that lists deposits, withdrawals, checks paid, interest earned and service charges or penalties incurred on an account. It shows the cumulative effect of these transactions, the account’s balance up to the date the report was prepared. Nature of the Cash Book
• The balance in the cash book is an asset to the
company, therefore:
CASH BOOK • A debit • A credit represents an represents a increase decrease Nature of the Bank Statement
• The balance as per the bank statement is a
liability to the bank, therefore:
BANK STATEMENT Dr. Cr. Balance (represents (represents decrease) increase) Reasons to Prepare a Bank Reconciliation Statement • The cash book records all transactions with the bank. The bank statement records all the bank's transactions with the business.
• The contents of the cash book should be exactly the
same as the record provided by the bank in the form of a bank statement, and therefore the business' records should correspond with the bank statement.
But this is not what happens at the end of the period!
Why do their balances differ at the end of the period? Reasons for Differences There are some transactions recorded by the depositor but not yet recorded by the bank Unpresented checks Deposit in transit Similarly, there are transactions appearing in the bank statement not recorded by the company Dishonored checks (NSF, DAIF) Service charges Omissions and errors made by the bank or the firm itself. Why is it necessary to reconcile their balances? Reasons to Prepare a Bank Reconciliation Statement • It reflects actual bank balance position – At the end of the period, we need to determine how much is the correct cash in bank balance to be reported in the Statement of Financial Position. • Detect mistake in cash book • Prevent frauds in recording banking transactions • Explain any delay in collection of checks • It identifies valid transaction recorded by one party but not by other Book Reconciling Items 1. Debit Memos a. NSF/DAIF checks b. Bank service charge 2. Credit Memos a. Note collected by bank b. Loan proceeds 3. Errors a. Errors in recording payables b. Errors in recording receivables Bank Reconciling Items 1. Deposit in transit 2. Outstanding checks a. Certified checks 3. Errors a. Errors in recording withdrawals b. Errors in recording deposits Forms of Bank Reconciliation 1. Adjusted balance method – The book balance and the bank balance are brought to a correct cash balance that must appear on the balance sheet. Forms of Bank Reconciliation 2. Book to bank method – The book balance is reconciled with the bank balance or the book balance is adjusted to equal the bank balance. Forms of Bank Reconciliation 3. Bank to book method – The bank balance is reconciled with the book balance or the bank balance is adjusted to equal the book balance. Steps in Making a Bank Reconciliation 1. Determine the balance per book and the balance per bank. 2. Compare deposits listed on the accounting records of the company with the deposits listed on the bank statement. Any deposit not yet recorded by the bank are deposits in transit. This is added to the balance per bank. 3. Determine if there are checks issued by the company but not yet paid by the bank. These are outstanding checks to deducted from the balance per bank. Steps in Making a Bank Reconciliation 4. Add to the balance per book any credit memoranda issued by the bank which is not yet recorded by the depositor. 5. Deduct from the balance per book any debit memorandum issued by the bank which is not yet recorded by the depositor. Steps in Making a Bank Reconciliation 6. Make appropriate adjustments to correct any errors in either the bank statement or the depositor’s accounting records. N.B. Errors are reconciling item of the party who committed them! 7. Determine whether the adjusted balance in the depositor’s records is equal to the adjusted balance of the bank statement. 8. Prepare journal entries to record any item in the bank reconciliation listed as adjustments to the balance per book. OPEN FORUM QUESTIONS???? REACTIONS!!!!!
Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 25
