Payroll

Another source of financial transactions is the company's payroll. While many companies
process payroll on their accounting software, others opt to outsource payroll to companies such
as ADP, Paychex, Intuit, or local firms.

(AccountingCoach is not affiliated with any of these companies and it does not receive affiliate
marketing commissions from any of them.)

To learn more about payroll use any of the following links:

 Explanation
 Quiz
 Questions and Answers (Q&A)
 Crossword Puzzles

Bank Reconciliation

The purpose of the bank reconciliation is to be certain that the financial statements are reporting
the correct amount of cash and the proper amounts for any related accounts (since every
transaction affects a minimum of two accounts).

The bank reconciliation process involves:

1. Comparing the following amounts

o The balance on the bank statement
o The balance in the company's general ledger account. (The account title might be Cash -
checking.)
2. Determining the reasons for the difference in the amounts shown in 1.

The common reasons for a difference between the bank balance and the general ledger book
balance are:

 Outstanding checks (checks written but not yet clearing the bank)
 Deposits in transit (company receipts that are not yet deposited in the bank)
 Bank service charges and other bank fees
 Check printing charges
 Errors in entering amounts in the company's general ledger

The outstanding checks and deposits in transit do not involve errors by either the company or the
bank. Since these items are already recorded in the company's accounts, no additional entries to
the company's general ledger accounts will be needed.

Bank charges, check printing fees and errors in the company's accounts do require the company
to make accounting entries. The company should make the entries before the financial statements
are prepared since a minimum of two accounts have the incorrect balances (due to double-entry
accounting). Here is an entry for a bank service charge that was listed on the bank statement: