RECONCILING THE BANK

ACCOUNT
 Reconciliation
• Necessary as the balance per bank and
balance per books are seldom in
agreement due to time lags and errors.
 A bank reconciliation
• Should be prepared by an employee
who has no other responsibilities
pertaining to cash.
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 WHY BRS?

• It helps to detect any mistake in the cash

book and in the pass book
• It prevents frauds in recording the banking
transactions
• It explains any delay in collection of
cheques
• It identifies valid transactions recorded by
one party but not by the other party
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 CAUSES OF DIFFERENCE

• Timing

• Nature of Transactions

• Errors/Omission

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 Few Causes of Difference

• Cheque issued but not yet presented

• Deposits on Transit
• Check dishonored marking NSF
• Bank charges or interests
• Directly colected by bank
• Directly paid by the bank/Direct Debit
• Errors or omissions

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 MEMORANDA

 Bank debit memoranda

• Indicate charges against the
depositor’s account.
Example: ATM service charges
 Bank credit memoranda
• Indicate amounts that will increase
the depositor’s account.
Example: interest income on account
balance
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 RECONCILING THE
BANK ACCOUNT

 Steps in preparing a bank reconciliation:

1 Determine deposits in transit
2 Determine outstanding checks
3 Note any errors discovered
4 Trace bank memoranda to the records
 Each reconciling item used in determining
the adjusted cash balance per books should
be recorded by the depositor.
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 BANK RECONCILIATION

W. A. LAIRD COMPANY
Bank Reconciliation
April 30, 2015
Cash balance per bank statement $ 15,907.45
Add: Deposits in transit The bank statement for 2,201.40
the Laird Company 18,108.85
Less: Outstanding checks shows a balance per
No. 453 bank of $15,907.45 on $ 3,000.00
No. 457 1,401.30
April 30, 2005.
No. 460 1,502.70 5,904.00
Adjusted cash balance per bank $ 12,204.85

Cash balance per books $ 11,589.45

Add: Collection of $1,000 note receivable plus interest earned
$50, less collection fee $15 $ 1,035.00
Error in recording check 443 36.00 1,071.00
12,660.45
On this date the
Less: NSF check 425.60
Bank service charge balance of cash per 30.00 455.60
books is $11,589.45.
Adjusted cash balance per books $ 12,204.85 7
 BRS: Practice Problem
• XYZ Company’s cash books show cash balance at ‘X” Bank on November 30, 2015 is Tk.
20,502 but the bank statement shows an ending balance Tk. 22,190 on the same date.
An examination of XYZ’s accounting records and November bank statement identified the
following reconciling items:
• A deposit of Tk. 3,680 was mailed on November 30 but does not appear on the bank
statement.
• Checks written in November but not charged to November bank statement are:
• Check # 7327 Tk. 150
• # 7348 Tk. 4,820
• # 7349 Tk. 31
• XYZ company has not yet recorded the Tk. 600 of interest collected by the bank
November 20 on a govt. bond held by the bank for XYZ
• Bank service charges of Tk. 18 are not yet recorded on XYZ’s book
• One of XYZ’s customer’s checks for Tk. 220 was returned with the bank statement with
marked NSF. The bank treated this bad check as a disbursement
• XYZ discovered that check # 7322, written in November for Tk. 131 in payment of an
account payable, had been incorrectly recorded in their books as Tk. 311
• A check of ABC company for the amount of Tk. 175 that had been incorrectly charged to
XYZ Company accompanied the bank statement. 8