Bank Reconcilation Flashcards
It is a monthly statement being sent by the bank to the depositor showing the amount of deposits, withdrawals, bank charges and the running balance of his account.
Bank Statement
A bank reconciliation consists of two columns: book balance and bank balance
Adjustments are done by adding unrecorded deposits or subtracting checks issued by the business.
• The reconciliation is complete when the adjusted column equals the unadjusted column.
Bank Reconciliation Process
Types of Reconciling Items
Deposits in Transit
Outstanding Checks
Bank Errors
No Sufficient Fund (NSF)
Credit Memos
Book Errors
are collections already recorded in the book as cash receipts but not yet reflected in the bank statement. These decrease / understate the bank balance.
Deposits in Transit
are checks already recorded in the book as a cash disbursement but not yet reflected in the bank statement. They increase / overstate the bank balance.
Outstanding Checks
are errors made by the bank in debiting and crediting the accounts of depositors. The effects can be an increase or decrease in the bank balance.
Bank Errors
are checks returned by the bank to the drawer due to insufficient fund. These checks increase / overstate the book balance from the drawer’s point of view. It will increase / overstate the book balance from the payee’s standpoint.
No Sufficient Fund (NSF)
are additions made by the bank to the depositor’s bank account but not yet recorded by the depositor. These decrease / understate the book balance.
➤Collections made by the bank on behalf of the depositor.
➤Interest income earne me deposits. ➤ Proceeds from loan directly credited or added by the
bank to the depositor’s account.
Credit Memos
are errors committed by the depositor. Ex. Erroneous recording in the accounting book. These either increase or decrease the book balance.
Book Errors
