Bank Reconciliation and Service Charges

Learning Objectives

  • LO4: Complete a bank statement reconciliation.

  • LO5: Record and journalize a bank service charge.

Bank Statement

  • Definition: A report issued by a bank showing deposits, withdrawals, and balances.

  • Canceled Check: A check that has been processed and paid by the bank.

Bank Statement Reconciliation

  • Key steps in reconciliation include:

    • Compare bank statement balance with adjusted check stub balance.

    • Adjust for service charges, outstanding checks, and deposits.

Recording a Bank Service Charge

  1. Document service charge on the check stub under "Other."

  2. Calculate and update the subtotal.

  3. Record service charge in the amount column.

Journalizing a Bank Service Charge

  • Example Entry:

    • Date: January 31

    • Debit: Miscellaneous Expense $25.00

    • Credit: Cash $25.00

    • Source Document: Memorandum No. 3

Reasons for Discrepancies in Records

  1. Unrecorded service charge in the depositor's records.

  2. Outstanding deposits recorded but not on bank statement.

  3. Outstanding checks recorded but not on bank statement.

  4. Math or recording errors by the depositor.

Identifying Outstanding Checks

  • A check stub without a check mark indicates an outstanding check.