CH.

7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

 Use of Bank Account

 The use of a bank contributes significantly to good internal control over
cash.
o Minimizes the amount of currency on hand.
o Creates a double record of bank transactions – one by the company and
the other by bank.
o Bank reconciliation. Compares the bank’s balance and explains any
differences to make them agree.

‫ان استخدام البنك يساهم بشكل جيد في الرقابة الداخلية عن النقدية‬.

COMPANY The company doesn’t keep the cash,

but it rather keeps it in the bank.

Dr. Cash Cr.

Increase Decrease
Bank Statement
Cash Balance
Per Books ‫كشف حساب بنكي‬

The two balances are

seldom the same at any
given time.
BANK

Both balances differ

Asset = Liability = Owner’s Equity from the "Correct" or
"True" balance.

Dr. Company Account Cr.

Decrease Increase
Cash Balance
Per Bank

1- Time Lag .‫تاخر تسجيل اي من الطرفين للعلمية في دفاتره‬ 

2- Error
.‫االخطاء من قبل اي من الطرفين عند التسجيل في الدفاتر‬ 
.‫المحاسبية‬

 It is necessary to make the balance per books and the balance per bank agree with the correct or
true amount – a process called reconciling the bank account.
CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

NOTE:
o The use of a bank contributes significantly to good internal control over cash.
o A company safeguards its cash by using a bank as a depository and as a clearing house for checks
received and written.
o Use of a bank minimizes the amount of currency that a company must keep on hand.
o The asset account Cash maintained by the company should have the same balance as the bank’s liability
account for that company.
o A bank reconciliation compares the bank’s balance with the company’s balance and explains any
differences to make them agree.

o Writing Checks a check is a written order signed by the depositor directing the bank
to pay a specified sum of money to a designated recipient.

o There are three parties to a check: (1) the maker (or drawer) who issues the
check, (2) the bank (or payer) on which the check is drawn, and (3) the payee to
whom the check is payable. A check is a negotiable instrument that one party can
transfer to another party by endorsement.
CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

BANK RECONCILIATION ‫التسوية البنكية‬

 The bank reconciliation should be prepared by an employee who has
no other responsibilities pertaining to cash.

 If a company fails to follow this internal control principle of

independent internal verification, cash embezzlements may go unnoticed.

.‫يجب أن يتم إعداد التسوية المصرفية من قبل موظف ليس لديه مسؤوليات أخرى تتعلق بالنقد‬ 
.‫ االختالسات‬u‫عندما ال يتم اتباع الرقابة الداخلية في اعداد التسوية البنكية فمن الممكن عدم اكتشاف‬ 

 Reconciling Items:
1- Deposit in Transit
2- Outstanding checks
Time Lags
3- Bank memoranda
4- Errors

o Deposits in Transit ‫اإليداعات في الطريق‬

- Deposits recorded by the depositor that have not been recorded by the
bank.
- Add these deposits to the balance per bank.

.‫ في دفاتر الشركة و لم تسجل في البنك‬u‫االيداعات التي تم تسجيلها‬ -

CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

o Outstanding checks ‫الشيكات الصادرة‬

- Issued checks recorded by the company but that have not yet been paid by
the bank.
- Deduct outstanding checks from the balance per bank.

.‫ للبنك لصرفها‬u‫الشيكات الصادرة من الشركة و المسجلة في دفاتر الشركة و لم يتقدم اصحابها‬ -

o Bank Memoranda ‫اشعارات البنك‬

 DM (Debit Memoranda) )‫اشعارات مدينة (نقص الحساب‬

 Bank Service Charges.

Dr.
Miscellaneous Exp. xx
April 30 Cr. x
Cash xxx

 Cash expense that should be recorded by the company.

 Non-Sufficient Fund (NSF) Checks.

Dr.
Cash xxx
April 25
Cr.
A/R xxx

Dr.
A/R xxx
April 30
Cr.
Cash xxx
 Checks received from customers recorded as cash and submitted to bank for
collection.

 These checks are (Bounced) rejected when customer’s balance is not enough.
CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

 Note that paid checks are referred to as “Cancelled Checks”.

 CM (Credit Memoranda) )‫اشعارات دائنة (زيادة الحساب‬

 Collection of Notes Receivable plus interest

 A company asks the bank to collect its notes receivable. In such
a case, the bank will credit the depositor’s account for the cash
proceeds of the note.

Dr.
Cash xxx
April 30 Cr. Account ‫ زي ال‬Notes receivable ‫ال‬
Note Receivable xxx ‫ بس بتبقى لفترة اطول و بتبقى‬receivable
Interest Revenue xxx Accounts receivable ‫ بينما ال‬، ‫ممضية‬
u‫ "هدفعلك االسبوع‬:‫ يعني مثال‬، ‫بتبقى شفهية‬
‫ بينما ال‬،‫الي جاي" ف مش الزم يمضي‬
‫ احنا كنا عارفين انه‬Notes receivable
، ‫دي الي معناها بتبقى مثال لفترة شهرين‬
‫ثالثة فبتخلي العميل بتاعك يمضي على‬
.‫ و مرات بيكون عليها فائدة‬،‫الكمبيالة‬

 Interest Earned
 Many banks also offer interest on checking accounts.
Dr.
Cash xxx
April 30
Cr.
Interest Revenue xxx
CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)

BANK RECONCILIATION ILLUSTRATED

CH.7 – BANK RECONCILIATION – PRINCIPLES OF ACCOUNTING (2)