Cash in Bank

 Definition
Internal control
Bank Reconciliation
Definition
Objectives
Procedures for its preparation
Correct Balances
Balances found

1BANKS
It is made up of all the money deposited or held in the different instruments of
cash management offered by banking entities, provided that such cash is available
easily available for use. Banks offer checking accounts, savings accounts or
fixed-term deposits. It is the most commonly used method by organizations to manage the
cash generated from its sales operations.

Companies place their cash in these entities due to the ease of management and
benefits they offer, electronic transfers, scheduled payments, interest
accrued from cash placements, loan possibilities among others.
Although banking institutions are also recognized for their reliability in management
In addition to cash, the company must also consider control measures for the allocated resources.
in bank accounts given the considerable amounts placed in them.

INTERNAL CONTROL

Cash in Bank

It is necessary to have control over the issued checks, charged by

the Bank, expired and canceled.
At least one person from those who sign the checks must
review the documents that give rise to the issuance of these, beforehand
to sign them.
3. The operations of bank accounts must be reconciled.
periodically and leave evidence of the reconciliations of all the
Cash accounts in the bank, monthly.
4. In the case of transactions in foreign currency, payments
The actions taken must correspond to the concepts and the amounts.
approved in the corresponding budgets.
In the budgeted units, updating is essential.
of the Control of Budgetary Resources for Salaries, Other Expenses and
Material Investments.
6. For the operational contributions made in foreign currency, the
countervalue of the corresponding national currency and for the checks
 the amounts received for the acquisition of goods must be provided
countervalue.
7. Authorized officials to sign checks cannot
account for these operations.
8. The budgeted units must be compatible with the
information on Budgetary Accounting and Patrimonial Accounting.

BANK RECONCILIATION
Bank reconciliation is a process that allows for confronting and reconciling the values that the
The company has registered, from a savings or current account, with the values that the bank
supplied through the account statement.

In general, the balance on the statement never matches the balance that the company has.
in their auxiliary books, which makes it necessary to identify the differences and the reasons for which
those values do not match.

Bank reconciliation is not an accounting record, but an internal control tool of

cash. Among the most common causes that lead to discrepancies in the values of auxiliary books
and the bank statement matches, we have:

Cheques issued by the company and that have not been cashed by the beneficiary of the
check.
Debit notes that the bank has charged to the bank account and that the company has not
registered in your auxiliary.
Credit notes that the bank has credited to the company's account and that it has not yet
has registered them in their auxiliaries.
Company errors when registering concepts and values in the book
auxiliary.
Bank errors when settling certain concepts

The objective of bank reconciliation is to ensure that all entries are reconciled.

accounts are correctly reflected in the bank balance and that they have not been
subscribed to another account, in addition to detecting both the recorded deposits.
that they have not reflected this information in the bank as those movements.
that have not been accounted for. Bank reconciliation therefore constitutes,
an essential element to show the true image of the company in
which refers to the treasury.
5, 6 and 7 Methods to prepare a bank reconciliation
4.1. Correct balances
To this end, I will first focus on the Correct Balances method because it is the most
used and educational in terms of itslearningfor the preparation of a reconciliation and that
In effect, for the purposes of what I will explain next, it will be the same for both methods. Which
consists of comparing thestateaccount statement sent by the bank with the records entered in
thebookbank manager of the company, then proceed to adjust the differences until
achieving that both balances are equal. To start preparing said document for said
It is of utmost importance to know the presentation and structuring rules.
of the body of the same:
1.
a.
b. Checks in Transit: ocheckspending, are those that as a consequence of
having been issued acheckbut at the date of performing the reconciliation, it does not
has been charged by the beneficiary at the bank, so it will appear as Credited in the
company books will not be Charged on the bank statement until
it has been charged.
c. Deposits in Transit: these are deposits that are generally sent to
end of the month and these are not Accredited in the bank so they will be Charged in
the company's books but not in the month's statement.
2. First, the 'Unregistered Transactions at the Bank' are presented, which include
the unrecorded entries by the bank are only taken into account in this line
the
a.
b. Notes ofCredit: They are all the deposits made by the bank
forconceptdiscounts on remittances, pledges, promissory notes, interests in favor of the
company, among others, but which have not been recorded in our books.
c.Debit Notes: They are charges made by the bank to the company for the concept
from: collection of interest, commissions, returned discounted effects, among others, that
for not having received theinformationthe respective of it has not been paid in
the company's books.
Omitted or Unregistered Checks: these are the checks that were issued
really but were never recorded in the company's books.
Omitted or Unregistered Deposits: These are the deposits that were made but
it was not carried out accordinglyregistration.
3. Second, the 'Unregistered Entries in Books' are presented where they include the
unrecorded or omitted items by the company where they are located:
a.
1.
2. Checks of different amounts: these are the checks that are credited with a
above or below the issuance amount.
3. Deposits of different amounts: these are the deposits that are charged with
an amount above or below the issued amount.
4. Misplaced checks: those that were charged instead of credited.
5. Misplaced deposits: They are those that instead of being loaded were
subscribers in the company's books.
6. Debit and credit notes misplaced: these are those that were placed incorrectly by mistake.
they charge instead of being credited and vice versa.
7. Deposits or Checks from Othersbanks: are those who by mistake
they are recorded or posted in the books, but do not correspond to that account or bank,
since various ones can be hadaccountsin various banks.
8. Expired Checks: are those checks that reach their due date
ofexpirationand they still haven't gone to cash at the bank, so there is
to disincorporate them by charging them the amount thereof.
b. Company Errors: this is where all the adjustments for errors are included and
mistakes on the part of the company, among which we have:
1.
2. Checks of different amounts: these are checks that are charged with a
amount above or below the issue amount.
 3. Deposits of different amounts: these are the deposits that are credited with
an amount above or below the issuance amount.
4.Omitted or unregistered checks: These are the checks that were issued.
Actually, but they were not recorded in the bank statement.
5. Omitted or unregistered deposits: they are the deposits that were issued.
they were not actually deposited in the bank.
6. Misplaced cheques: these are the ones that were credited instead of being charged.
7. Misplaced deposits: these are the ones that were charged instead of being credited.
in the bank statement.
8. Debit and credit notes misplaced: those that are misallocated due to error.
they charge instead of being credited and vice versa.
9.Deposits or Checks from othersCompanies: are those who by mistake
they deposit or credit at the bank, but do not correspond to that account, since
that a bank has variousclients.
c.Errors of the Bank: although they are not very common, here are the adjustments of
all omissions, errors, and mistakes on the part of the Bank, among which
we have:
3. Third, the 'Errors' must be presented, where all adjustments are reflected for
concept of mistakes that may exist in the two compared documents:

Important: the order from 1) to 3) must be presented exactly as shown here, contrary to your
numerals or breakdowns whose order can be anything, the important thing is that they are all represented
the necessary adjustments to achieve the correct or found balances.
Example of a reconciliation prepared using the correct balances method:
The following document reflects the movements of the month of July in the general ledger of
bankBolívarStrong belonging to El Trébol C.A.

GENERAL LEDGER OF BANCO BOLÍVAR FUERTE CTA. CURRENT NO. 5698-22356-96

ACCOUNT CODE NO: 1.1.02.01.02 JULY 2006 MOVEMENTS

DATE CONCEPT MUST NEWS BALANCE

01/07/06 Balance 230,000.00

01/07/06 Correction of Deposit No. 1956 166,500.00 396,500.00

01/07/06 Correction of Check No. 4505 122,600.00 273,900.00

02/07/06 Check No. 4508 47,700.00 226,200.00

04/07/06 Deposit No. 3984 180,000.00 406,200.00

06/07/06 N.C. Discounted effects 100,000.00 506,200.00

14/07/06 Check No. 4509 55,000.00 451,200.00

 20/07/06 52,000.00 399,200.00

25/07/06 Deposit No. 4866 130,000.00 529,200.00

28/07/06 65,500.00 463,700.00

30/07/06 Deposit No. 5698 78,000.00 541,700.00

28/07/06 15,800.00 525,900.00

31/07/06 Deposit No. 6892 40,000.00 565,900.00

This is the bank statement sent as of July 31, 2006:

BOLÍVAR FUERTE BANK S.A.C.A. CONTROL NO. 3377233

Capital Bs. 280,000,000.00 THE CLOVER C.A.

STATEMENT OF ACCOUNT Account code No. 5698-22356-96

FROM 01/07/2006 TO 31/07/2006 PAGE 1/1

DATE CONCEPTS CHARGES FERTILIZERS BALANCES

JULIO Balance 185,900.00

01 Deposit No. 2365 153,800.00 339,700.00

02 Check No. 4508 47,700.00 292,000.00

05 Deposit No. 3984 180,000.00 472,000.00

06 N.C. Discounted effects 100,000.00 572,000.00

06 N.D.Expensesof collection 5,000.00 567,000.00

15 Check No. 4506 25,000.00 542.000,00

20 Check No. 4510 25,000.00 517,000.00

25 Deposit No. 4866 130,000.00 647,000.00

30 Deposit No. 5698 78,000.00 725,000.00

Now we will see the reconciliation that was carried out last month to adjust the balances, note that already
they bring a different balance from the beginning, 230,000.00 Dr. according to books and 185,900.00 according to
Cr. bank

THE CLOVER C.A.

BANK RECONCILIATION

BOLÍVAR FUERTE BANK AS OF 30/06/06

CURRENT NO. 5698-22356-96 METHOD: CORRECT BALANCES

DESCRIPTION Partial BOOKS BANK

Balances as of 30/06/06 230,000.00 -185,900.00

CHECKS IN TRANSIT

17/06/06 25,000.00

20/06/06 40,800.00 65,800.00

DEPOSITS IN TRANSIT

30/06/06 153,800.00 -153,800.00

BUSINESS ERRORS

Deposit No. 1956 registered 18,500.00

Deposit No. 1956 correct 185,000.00 166,500.00

Check No. 4505 mislocated 61,300.00 -122,600.00

BALANCES CORRECT AS OF 06/30/06 273,900.00 -

273,900.00

As can be seen in the previous reconciliation, the balances of the books and the bank were adjusted.
until they equalized, which turns out to be the end of the reconciliation.
Now I will prepare the reconciliation for the month of July using the same method to demonstrate which
these are the differences between the two and thus reach the 'correct balances' that both should have.
As explained in the first part, the items that were should first be cross-checked.
adjusted in the previous reconciliation, to which it should be inspected if those items have already been
settled, otherwise they should be taken into account for the current reconciliation.
In this way, it can be noted that check No. 4506 has already been cashed by its beneficiary on July 15.
opposite of No. 4507 which still does not appear in the statement as collected, therefore
that if the check does not have an expiration date, it is considered to still be in transit.
Also note that deposit No. 2365 was recorded in the bank's books onvalorwhat it is
recorded in books, if there is any difference in the deposits or checks in transit, we proceed
to determine whose fault it is, because in such a case, whether by omission or difference in
amount, the adjustment of these items must be reflected in the reconciliation of the month of July.
The company errors were also recorded in the bank's ledger, so they were not
they will be taken into account for adjustments.

Now, we review what the differences arose as a consequence of

theoperationscarried out in the month of July, so each item is compared one by one, in this
Examples include the following: such as checks in transit are at No. 4507 of the month
past, and numbers 4509, 4511, and 4512 of this month, as deposits in transit we only have number
6892, there is a debit note for collection expenses of the discounted effects that is not
registered, and we finally found a difference in check No. 4510 which was registered in
books for Bs. 52,000.00 and appears charged for Bs. 25,000.00, with aanalysisof the supports
it was deduced that the error was the company's fault.
Upon finding the transactions that will be adjusted, the control document is prepared.
internal

THE CLOVER C.A.

BANK RECONCILIATION

BOLÍVAR FUERTE BANK AS OF 07/31/06

CURRENT Nº 5698-22356-96 METHOD: CORRECT BALANCES

DESCRIPTION PARTIAL BOOKS BANK

Balances as of 07/31/06 565.900,00 -725.000,00

CHECKS IN TRANSIT

20/06/06 40,800.00

14/07/06 55,000.00

28/07/06 Check No. 4511 65.500,00

28/07/06 15,800.00 177,100.00

DEPOSITS IN TRANSIT
31/07/06 40,000.00 -40,000.00

DEBIT NOTES

06/07/06 5,000.00 -5,000.00

BUSINESS ERRORS

Check No. 4510 registered 52,000.00

Cheque No. 4510 correct 25,000.00 27,000.00

CORRECT BALANCES AS OF 07/31/06 587,900.00 -587,900.00

Now let's look at the same document but prepared with four columns:

THE CLOVER C.A.

BANK RECONCILIATION

BOLÍVAR FUERTE BANK AS OF 31/07/06

CURRENT No. 5698-22356-96 METHOD: CORRECT BALANCES

DESCRIPTION BOOKS BANK

MUST NEWS MUST NEWS

Balances as of 31/07/06 565,900.00 725,000.00

CHECKS IN TRANSIT

20/06/06 40,800.00

14/07/06 55,000.00

28/07/06 65,500.00

28/07/06 15,800.00

DEPOSITS IN TRANSIT
31/07/06 40.000,00

DEBIT NOTES

06/07/06 Collection Expenses 5,000.00

COMPANY ERRORS

Correction of Check No. 4510 27,000.00

SUBTOTALS 592.900,00 5.000,00 177.100,00 765.000,00

CORRECT BALANCES AS OF 07/31/06 587,900.00 587,900.00

As can be seen, the adjustments are made in four columns without placing any sign.
negative because in this way it is completely unnecessary, the subtotalization is carried out.
where all columns are summed vertically to then extract the final balance through
from the difference of both, both in books and in the bank.
4.2. Balances found
This method is based on preparing the reconciliation starting with one of the two balances,
(the Bank one or the Company one), to then reflect the differences in a single column,
deposits or checks that compensate for the discrepancies between both, so that in the end
find in the opposite balance, which is the purpose of this method.
To exemplify, we will consider the previous one, so I will point out the presentation of
document:

THE CLOVER C.A.

BANK RECONCILIATION

BOLÍVAR FUERTE BANK AS OF 07/31/06

CURRENT Nº 5698-22356-96 METHOD: FOUND BALANCES

DESCRIPTION PARTIAL TOTAL

BALANCE ACCORDING TO BANK AS OF 07/31/06 725,000.00

CHECKS IN TRANSIT

20/06/06 40,800.00

14/07/06 55,000.00
28/07/06 65,500.00

28/07/06 15,800.00 -177,100.00

DEPOSITS IN TRANSIT

31/07/06 Deposit No. 6892 40,000.00 40,000.00

DEBIT NOTES

06/07/06 Collection Expenses 5,000.00 5,000.00

COMPANY ERRORS

Check No. 4510 registered 52,000.00

Check No. 4510 correct 25,000.00 -27,000.00

BALANCE ACCORDING TO BOOKS AS OF 31/07/06 565,900.00

Note that in this case we started with the balance of the account statement (Bs. 725,000.00 Cr.)
then all the adjustments were reflected just like the previous method, but in a single column,
until finally the balance of the Banco ledger was "found" (Bs. 565,900.00 Dr.).