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April 25, 2006

Reconciling the Bank Statement

Here’s a tip a dear neighbor (Herb) had learned in the 1920’s from an instructor at a technical college: When doing the bank reconciliation, put it where it ain’t. He found it to be helpful and wanted me to share it.

Here are several examples to show how it helped Herb and others:

The bank statement already shows the bank service charge. However, the company usually doesn’t know the amount of the service charge until the bank statement arrives. So at that point the service charge is not in the company’s general ledger. To reconcile the bank statement with the general ledger Cash account, you will need to enter the bank service charge into the Cash account. Therefore, in the bank reconciliation process the bank service charge will be listed as an adjustment to the books (to the Cash account). As my neighbor learned, you put the service charge where it ain’t.

Next let’s talk about outstanding checks. Outstanding checks are checks that have been written by the company, but these checks have not yet cleared the bank. (They have not yet made their way to the company’s bank account on which they were drawn or written.) Outstanding checks, like all checks written, are already recorded on the company’s books, but they are not on the bank statement. Guess what? Put them where they ain’t. Outstanding checks will be listed as an adjustment to the balance per the bank.

Deposits in transit are already on the books, but they are not on the bank statement. Deposits in transit will be an adjustment to the balance per bank.

I hope you found Herb’s tip to be helpful.

Learn more about Bank Reconciliation.

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Comments

13 Responses to “Reconciling the Bank Statement”

  1. emz on June 7th, 2008 12:11 am

    WHAT ARE THE NECESSARY TREATMENTS TO DO IF THE TRANSACTIONS FROM THE CASH BOOK MATCHES THE TRANSACTIONS IN THE BANK STATEMENT BUT THERE IS STILL DIFFERENCE IN THE BALANCE?

  2. GRACIE on February 19th, 2009 9:15 am

    CAN I HAVE A SAMPLE OF A BANK RECONCILIATION STATEMENT - STARTING WITH BALANCE IN THE CASH BOOK

  3. Shirley on March 5th, 2009 11:21 am

    My bank statement for Dec. 2008 balanced. The Jan. statement did not balance. I have checked every entry and still cannot balance. This has caused me to be unable to balance my check register for over a year. Do you have any ideas what I have done wrong. If not, can you tell me how to start from scratch for 2009. Thank you.

  4. Kaips on June 3rd, 2009 10:31 pm

    I do not have much experience with bank rec. This is for the Department (Public Service)

    Behind with DEC 2007 to date. Pls assist me. There was alot of Journals done so I am confused.How do I start? I have printed information from your website to read too. Thankyou

  5. accounting outsourcing on June 10th, 2009 6:29 am

    Great work…
    Keep it up…..
    Regards,
    accounting outsourcing

  6. ACoach on July 6th, 2009 8:48 am

    For a sample bank reconciliation, go to AccountingCoach.com and under the tab Topics Explained select Bank Reconciliation.

  7. ashikarb on July 30th, 2009 10:51 pm

    i do know about bank reconciliation i want to know about from a to z about bank reconciliation can i have a sample of bank reconciliation statement

  8. ACoach on July 31st, 2009 6:23 am

    Go to our free website AccountingCoach.com and select the topic explanation for Bank Reconciliation. There you will find a detailed bank reconciliation with step-by-step instructions.

  9. Mike on August 11th, 2009 10:56 am

    Hopefully this isn’t a silly question. I am an independent contractor. How do I classify technical books I purchase as reference and educational material for my job?

  10. REDLIPZ on October 6th, 2009 7:48 am

    HI,, WOULD YOU PLEASE GIVE ME ANOTHER EXAMPLE OF BANK STATEMENT” THANKZ..(^.^).

  11. BATAINEH on October 13th, 2009 5:17 am

    i do know about bank reconciliation i want to know about from a to z about bank reconciliation can i have a sample of bank reconciliation statement

  12. ACoach on October 13th, 2009 8:36 am

    See our Explanation of Bank Reconciliation under the Topics Explained tab on AccountingCoach.com.

  13. lola on October 31st, 2009 6:38 pm

    i do know about bank reconciliation i want to know about from a to z about bank reconciliation can i have a sample of bank reconciliation statement

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