Transcript Slide 1

Bank Reconciliations
Chapter 8
BANK STATEMENTS
A bank statement
shows:
1. cheques paid
and other debits
charged against
the account
2. deposits and
other credits
made to the
account
3. account balance
after each day’s
transactions
ACCOUNT W. A. LEE COMPANY
STATEMENT 500 QUEEN STREET
FREDERICTON, NB, E3B 5C2
Statement Date/Credit
Line Closing Date
April 30, 2003
457923
ACCOUNT NUMBER
Balance
Last Statement
13,256.90
Deposits and Credits
No. Total Amount
20
34,805.10
Cheques and Debits
Total Amount
26
32,154.55
Balance
This Statement
15,907.45
DEPOSITS AND
CREDITS
Date
Amount
DAILY BALANCE
Date
Amount
4-2
435
644.95
4-5
436
3,260.00
4-4
437
1,185.79
4-3
438
776.65
4-8
439
1,781.70
4-7
440
1,487.90
4-8
441
2,420.00
4-11
442
1,585.60
4-12
443
1,226.00
=================
4-29
NSF
425.60
4-29
459
1,080.30
4-30
DM
30.00
4-30
461
620.15
4-2
4,276.85
4-3
2,137.50
4-5
1,350.47
4-7
982.46
4-8
1,320.28
4-9 CM
1,036.00
4-11
2,720.00
4-12
757.41
4-13
1,218.56
==============
4-27
1,545.57
4-29
2,929.45
4-30
2,128.60
4-2
16,888.80
4-3
18,249.65
4-4
17,063.86
4-5
15,154.33
4-7
14,648.89
4-8
11,767.47
4-9
12,802.47
4-11
13,936.87
4-12
13,468.28
=============
4-27
13,005.45
4-29
14,429.00
4-30
15,907.45
Symbols:
Error Correction
CHEQUES AND DEBITS
Date No.
Amount
CM
Credit Memo
EC
DM
Debit Memo
INT Interest Earned
NSF
Not Sufficient Funds Reconcile Your
SC
Service Charge
Account Promptly
RECONCILING THE BANK ACCOUNT
•
•
Reconciliation is necessary because the
balance per bank and balance per books
are seldom in agreement due to time lags
and errors.
A bank reconciliation should be prepared
by an employee who has no other
responsibilities pertaining to cash.
Terms
• Deposits in transit
– Deposits recorded by depositor that have not
been recorded by bank
• Outstanding cheques
– Cheques written (issued) and recorded by
company that have not been presented
to/paid by bank
• Adjusted balance
– Reconciled or correct cash balance
Terms
• Debit memoranda
– Charges against depositor’s account (e.g.
service charges, RC (returned)/NSF
(insufficient funds) cheques)
• Credit memoranda
– Amounts that increase depositor’s
account (e.g., interest earned)
Bank Reconciliation
Procedures
$ Per Bank Statement
-outstanding cheques
+deposits in transit
+/- bank errors
= correct cash amount
$ Per Books
-NSF cheques
-cheque printing or
other service charges
+notes collected by
bank
+/- book errors
= correct cash amount
Illustration 8-11
Reconciling Journal Entries
• Books
– Each reconciling item in
determining the adjusted
balance per books MUST be
journalized and posted
• Bank
– Do NOT journalize any
entries on bank side
Bank Rec Demo
• Cash balance April 30 per books $11,981.19, per bank
15,907.45
• Bank Memorandums:
– Debit Memorandums
• NSF cheque $425.60
• Bank service charges $30
– Credit Memorandums:
• Collection of Note Receivable for $1,000 plus interest earned of $50,
less bank collection fee $15.
• Outstanding cheques: No. 445 $2,500, No.446 $1604.70, No.
448 $1307.80.
• Deposits in Transit: April 30 deposit (recorded by bank on May
1) $2501.40
• Errors
– Chq No. 443 was correctly written by Lee for $1,226 and was
correctly paid by the bank. However it was recorded as $1,622
by Lee Company.
– Chq No. 447 was correctly recorded by Lee, the cheque was
properly written for $659.91, however the bank improperly paid
$620.15