Bank ReconciliationĪ bank reconciliation compares the bank statement and our company’s records and reconciles or balances to two account balances. We need to do a bank reconciliation to find out why there is a difference. The bank balance on September 30 is $27,395 but according to our records, the ending cash balance is $24,457. An example of a cash listing is: My Company’s Records The company’s records (or books) refers to the general ledger posting and can be in the form of cash disbursement journal, cash receipt journal, cash general ledger postings or lists of cash transactions. In the Checks and debits section, you see the individual checks that have been processed by the bank and you also see SC for a bank service charge on your account as well as a NSF (stands for Non Sufficient Funds) and means we made a deposit from a customer but the customer did not have enough money to pay the check (bounced check). In the Deposit and credits section, you see the deposits made into the account and a CM which is a collection of a note (see note at bottom of statement) and interest the bank has paid to your account. This bank statement is an example of the transactions that occurred during the month. NSF is for customer payment that could not be funded due to Non Sufficient Funds. Note was for $3500 but bank charged a $500 collection fee. A bank statement looks like this: First BankĬM is for collection of a note. Bank StatementĪ bank statement is a record of your bank account transactions, typically for one month, prepared by the bank. The company prepares a bank reconciliation to determine its actual cash balance and prepare any entries to correct the cash balance in the ledger. A bank reconciliation is a schedule the company (depositor) prepares to reconcile, or explain, the difference between the cash balance on the bank statement and the cash balance on the company’s books. The company checks this statement against its records to determine if it must make any corrections or adjustments in either the company’s balance or the bank’s balance. The bank sends the company a statement each month. For this reason, in your bank account, deposits are credits (remember, liabilities increase with a credit) and checks and other reductions are debits (liabilities decrease with a debit). Keep in mind, a bank account is an asset to the company BUT to the bank your account is a liability because the bank owes the money in your bank account to you. The company deposits its cash receipts in a bank checking account and writes checks to pay its bills. Most companies use checking accounts to handle their cash transactions. Cash does not include postage stamps, IOUs, time CDs, or notes receivable. Only demand CDs that may be withdrawn at any time without prior notice or penalty are included in cash. A certificate of deposit (CD) is an interest-bearing deposit that can be withdrawn from a bank at will (demand CD) or at a fixed maturity date (time CD). In accounting, cash includes coins currency undeposited negotiable instruments such as checks, bank drafts, and money orders amounts in checking and savings accounts and demand certificates of deposit.
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