bank reconciliation

cash

medium of exchange used when selling or purchasing goods and services

bank reconciliation

is a schedule prepared to bring the depositor’s cash balance and the related bank’s cash balance into agreement

3 methods to prepare bank reconciliation

1. unadjusted bank to book balance method

2. unadjusted book to bank balance method

3. adjusted balance method

unadjusted bank to book balance method

method reconciles the bank statement so that the reflected cash balance will be the same as the company’s record

unadjusted book to bank balance method

reconciles the balance per book so that the reflected cash balance will be the same as the bank balance

adjusted balance method

reconciles both the balance per bank and the balance per book in order to reflect the correct cash balance

bank statement item

1. deposit in transit

2. outstanding checks

3. bank errors

book statement items

1. bank credits

2. bank debits

3. book errors

deposits in transit

deposits made prior to the cutoff period already recorded in book

outstanding checks

checks issued by the company but not yet paid by the bank because they have not been presented to the bank for payment

bank errors

items erroneously recorded by the bank

bank credits

deposits made by the bank in the company’s account but not yet refelcte in the books records

bank debits

charges made by the bank against the company’s account but not yet recorded in book

book errors

items erroneously recorded by the company

bank statement

monthly report provided by the bank to the account holder of the checking account reflecting the transactions that affected their bank accounts