Monday, May 12, 2008

Accounting Bank Reconciliation Example

A bank reconciliation is created by accountants periodically to display the differences between cash reported on a companies bank statement and the cash balance on company’s books.

Bank Statement Balance Reconciling Items:

Deduct: Outstanding checks.
Add: Deposits in transit.
Add or Deduct: Bank accounting errors.

Book Balance Reconciling Items:
Deduct: Bank service charge.
Deduct: Nonsufficient funds check (NSF).
Add: Interest earned on checking accounts.
Add: Collections made by the bank.
Add or Deduct: Accounting Book errors.

Following these two steps to reconcile bank statements:
  1. Reconcile bank statement balance to the adjusted bank balance.
  2. Reconcile book balance to the adjusted book balance.

After a bank reconciliation the adjusted balances should be equal to each other. Accounting Software will often reconcile bank balances for accountants.

Additional Links:
Definition of a Bank Statement
Canceled Checks and Bank Reconciliation Journal Entry

External Links:
Accounting Bank Reconciliation Tutorial


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