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The statement itemizes the cash and other deposits made into the checking account of the business. The statement also includes bank charges such as for account servicing fees. Entries made in the sales and cash receipts journal are also totaled at the end of the month, and the results are posted what is the proper adjusted cash balance per bank? to the accounts receivable account in your general ledger. If they aren’t the same, you can tell that you made an error somewhere along the line. Looking for a quicker way to reconcile your statement? Cloud accounting software like Quickbooks makes preparing a reconciliation statement easy.
Outstanding Cheques totalling $120 at the end of the month. Journalize the entries required by the reconciliation.
Preparing a Bank Reconciliation Statement
Most of these charges are posted to your bank statement, but may not be posted to your cash account at month-end. You also need to adjust your cash records for interest earned on your bank account balance. Therefore, company records may show one or more deposits, usually made on the last day included on the bank statement, that do not appear on the bank statement. These deposits are called deposits in transit and cause the bank statement balance to understate the company’s actual cash balance. Since deposits in transit have already been recorded in the company’s books as cash receipts, they must be added to the bank statement balance. The Vector Management Group made a $3,000 deposit on the afternoon of April 30 that does not appear on the statement, so this deposit in transit is added to the bank statement balance. The ending balance on a bank statement almost never agrees with the balance in a company’s corresponding general ledger account.
Finally, add or subtract all the items marked as reconciling items from your bank’s closing cash balance. Then, compare the balance as per the cash book with the balance as per the passbook of your account. In case the two balances do not match, it is quite possible that the opening balances also did not match. In such a case, you will have to reconcile your bank statement with your books of accounts for the previous period. If there is no error in the beginning balances, then there is certainly a reconciling item within the current period itself that you have failed to identify. Once the adjusted balance of the cash book is worked out, then the bank reconciliation statement can be prepared. In this way, the number of items that cause the difference between the passbook and the cash book balance gets reduced.
(a) Prepare a bank reconciliation at May 31.
Are there any checks that were outstanding last month that still have not cleared the bank? If so, be sure they are on your list of outstanding checks this month. If a check is several months old and still has not cleared the bank, you may want to investigate further. To prepare a bank reconciliation, gather your bank statement and a list of all of your recent transactions. If you find an error on the bank’s part, contact them as soon as possible to let them know about the discrepancy.
What is the difference between a bank balance and an adjusted bank balance?
On the bank side of the bank reconciliation, you start with the ending balance per the bank statement, you add deposits in transit and subtract outstanding checks. The adjusted represents the adjusted bank balance that is compared to the adjusted bank balance.