BANK RECONCILIATION

A Bank reconciliation is a process that explains the difference between the bank balance shown in an organization's bank statement, as supplied by the bank, and the corresponding amount shown in the organization's own accounting records at a particular point in time. Bank Reconciliation statement is the form that allows individuals to compare their personal bank account records to the bank's records of the individual's account balance in order to uncover any possible discrepancies.

The differences in the balances may be due to:

1. Outstanding checks

Checks which have been written, but have not yet cleared the bank on which they were drawn. In the bank reconciliation, outstanding checks are deducted from the balance per bank.

2. Deposits in transit

          A company's receipts that appear on the company's records but do not yet appear on the bank statement.  

                 Example:  A retail store's receipts of March 31 are deposited after banking hours on

                              March 31 or on the morning of April 1. Those receipts are in the company's

                              general ledger Cash account on March 31, but are not on the March 31 bank

                              statement. As a result they are said to be "in transit" on March 31.

3. Bank service charge expense

This is an administrative expense which reports the fees incurred by a company for the expenses associated with its checking account transactions.

4. Errors in the check stub entries

5.Cancelled checks

          Checks that have been paid by the bank.

What is a CHECK? A check or cheque (in American English) is a document that orders a payment of money from a bank account. It is also a written order directing a bank to pay money as instructed.

   

Here are some steps in writing a check:

1. Payee

•    List the payee at the top of the check. Without doing this, anyone could find the check and write their name in the payee section. This is essentially the equivalent of leaving a wad of money laying around. (Ramon Carlo David- based on the given example)

  2. Date

     The day you write the check. A bank may refuse to pay a check that is more than six months old. (October 13, 2010.)

  3. Amount

     The amount to be paid. You write this in both words and in numbers. (P3,540.00 or Three thousand, five hundred forty pesos.)

  4. Signature

     Your signature approves the payment.

 WHY USE CHECK? We use checks or cheques, because if we are dealing with a lot of money like for example millions, billions and the like using checks is much more convenient cause you do not need to carry bundles of money, it is safer because if the check was stolen you can easily issue a stop payment on a check, you will not get hold up, it is also easier to track; you can easily tracked of who used your check and some information about the account.

      All the stuffs here regarding Bank Reconciliations is important in managing a bank account it will help you out in dealing with your personal accounts or checks. It will help you to keep track on your accounts. The advantages of bank reconciliation statements are: it ensures the accuracy of the balances shown by the pass book and cash book, ensures that all general ledger items have cleared the company's bank account,  helps to detect and rectify any error committed in both the books,  helps to update the cash book by discovering some entries not yet recorded and it indicates any undue delay in the collection and clearance of some checks.Reconciliation is a very simple task if you make it a habit to keep accurate records of your withdrawals and deposits.

Approved and checked by: Prof. Crisencio M.  Paner

http://profcrispanercurriculumvitae.blogspot.com/