What is Bank Reconciliation Statement
A bank reconciliation statement is a document that compares a company’s cash balance on its balance sheet to the amount on its bank statement—reconciling the two accounts aids in determining whether accounting adjustments are required. Bank reconciliations are performed regularly to guarantee that the company’s cash records are accurate. They also aid in the detection of fraud and cash manipulation.
adjusting journal entries bank reconciliation
The following are examples of common changes to the balance per book:
- Bank costs or service charges for maintaining the account, fees for returned checks, wire transfer processing, check to print, and so on.
- Earned bank interest
- Payments on loans
- Supplier and other electronic costs or remittances
- Customer checks that were placed but are now being returned due to a lack of money
Bank Service Charges would be debited, and Cash would be credited in the journal entries for the bank fees.
The journal entry for a cheque returned due to insufficient funds will debit Accounts Receivable and credit Cash.
The company’s interest earnings will be recorded as a debit to Cash and a credit to Interest Income.
How to do bank reconciliation
- To discover uncleared checks and deposits in transit, compare the company’s list of issued checks and deposits to the checks reported on the bank statement.
- Add any deposits in transit to the cash balance indicated on the bank statement.
- Deduct any unpaid checks.
- This will return the bank’s adjusted cash balance.
- Then, using the company’s closing cash balance, add any interest earned and the number of notes receivable.
- Deduct any bank service fees, fines, and non-sufficient funds checks. This results in the adjusted business cash balance.
- The adjusted bank balance should equal the company’s final adjusted cash balance after reconciliation.
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