BANK RECONCILIATION STATEMENTS

Bank Reconciliation

analyzes the items and amounts

that differ between the cash balance reported in the bank

statement and the balance of the cash in bank account in

the ledger.

Timing Differences-

• Bank Reconciliation discrepancies

• when certain transactions are

  recorded by the company but not yet by the bank, or vice versa.

Recording Errors

• Bank Reconciliation discrepancies

• original entry error, duplication and

Original Entry Error-

• Three Types of Recording Error:

• occurs when the wrong

  amount is entered or posted in an account or

  when the correct amount is entered in the wrong

  account

• Duplication

• Three Types of Recording Error:

• - happens when an accounting entry

  is posted twice; thus, duplication occurs.

Omission

• Three Types of Recording Error:

• occurs when a transaction was not

  recorded in the books.

Bank Section

• Two Sections of Bank Reconciliation Statement:

• starts with the cash balance

  according to the bank statement and ends with

  the adjusted or reconciled balance.

Book Section

• Two Sections of Bank Reconciliation Statement:

• starts with the cash balance

  according to the company’s records and ends

  with the adjusted balance.

Single-Date Balance

• Two Types of Bank Reconciliation Statements:

• the balance per bank and

  per company's records are reconciled at the end

  of the period.

Four-Column

• Two Types of Bank Reconciliation Statements:

• assigned for the beginning

  reconciliation, deposits or receipts, withdrawals

  or disbursements, and ending reconciliation.

Adjusted Balance Method

Forms of Bank Reconciliation Statement:

• both bank and book

balances are reconciled to match their balances.

deposits in transit and erroneous

bank charges

Add ( Adjusted Balance Method)

outstanding checks and

erroneous bank credits

Deduct ( Adjusted Balance Method)

Bank-to-Book Method

Forms of Bank Reconciliation Statement:

• the balance per bank

statement is given. Then the balance per book is

determined.

Bank-to-Book Method-

Forms of Bank Reconciliation Statement:

• the balance per bank

  statement is given. Then the balance per book is

  determined.

Book-to-Bank Method-

Forms of Bank Reconciliation Statement:

• starts with the

  unadjusted cash balance per books. Ends with

  the balance per bank.

Deposit in Transit-

Bank Reconciling Items:

• cash received and recorded

  in the company’s books but are not yet reflected

  in the bank statement, understate the cash and

  must be added.

Outstanding Checks

Bank Reconciling Items:

- disbursements already

recorded in the company’s books but are not yet

reflected in the bank’s statement, overstate the

cash and must be deducted.

Bank Errors

Bank Reconciling Items:

wrong amounts recorded, may

understate or overstate the cash balance and

must be added or deducted.

Credit Memos

Bank Reconciling Items:

deposits or receipts shown in

the bank statement but are not yet recorded in

the books, understate the cash balance and must

be added.

Debit Memos

Bank Reconciling Items:

withdrawals or disbursements

reflected in the bank statements but are not yet

recorded in the books, overstate the cash balance

and must be deducted.

Book Errors

Bank Reconciling Items:

wrong amounts recorded by the

company, overstate or understate the cash

balance and must be added or deducted.

Bank Section

Book Section

• the bank and book balances are reconciled to a correct balance and has two sections

.

Adjusted Balance Method

the bank and book balances are reconciled to a correct balance and has two sections

(bank section and book section). Items that understate the cash are added, while items that overstate the cash are

deducted

Bank-to-Book Method

Method- the balance per bank statement is given, the balance per books shall be determined

and answers the question: How much cash is recorded in the company’s books before adjustment?

Book-to-Bank Method-

computation starts with the balance per books and ends with the balance per bank and the items added in the previous form are deducted, while the items deducted are now added.