Bank Reconciliations
Bank reconciliations are:
• Prepared periodically to explain the
difference between cash reported on the
bank statement and the cash balance on
company’s books.
• An important element of internal control.
1
© 2013 McGraw-Hill Ryerson Limited.
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Bank Statement
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Total Deposits
and Credits
1,163.42
Current
Balance
2,050.00
Date
Cheques and
Debits
Number Amount
Deposits and
Credits
Amount
Daily
Balance
Oct 1
3
9
15
16
17
18
19
20
26
29
31
2
119
123
127
122
120
125
121
128
55.00
25.00
50.00
23.00 DM
70.00
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
1,609.58
1,794.58
1,949.58
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
The bank statement
provides information
about everything
that has gone
through the bank
account for a given
period of time.
CM – Credit Memo
DM – Debit Memo
EC – Error Correction
IN – Interest Earned
NSF – Non-sufficient Funds
OD – Overdraft
SC – Service Charge
LO 6
Cash Disbursements Journal
Cheque #
119
120
121
122
123
124
125
126
127
128
$
$
3
Amount
55.00
200.00
120.00
70.00
25.00
150.00
15.00
200.00
50.00
135.00
1,020.00
(101)
© 2013 McGraw-Hill Ryerson Limited.
The general ledger,
cash receipts, and
cash disbursements
journals provide
information about
everything that has
gone through our
accounting records
for a given period of
time.
LO 6
Bank Reconciliation - Example
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Date
Cheques and
Debits
Number Amount
Oct 1
3
9
15
16
17
18
19
20
26
29
31
4
119
123
127
122
120
125
121
128
Bank Statement
*
Total Deposits
and Credits
1,163.42
Current
Balance
2,050.00
Deposits and
Credits
Amount
Daily
Balance
55.00
25.00
50.00
23.00 DM
70.00
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
1,609.58
1,794.58
1,949.58
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
Why are the balances
different?
Some items are reflected
on the bank statement
but not in the accounting
records and vice versa.
General Ledger Cash Account
Cash
Account # 101
Date Explanation PR Debit
Credit
Balance
30-Sep Balance
1,609.58
31-Oct
CR6 815.00
2,424.58
31-Oct
CD4
1,020.00 1,404.58
© 2013 McGraw-Hill Ryerson Limited.
LO 6
Reconciling Items
Bank Statement
Outstanding
cheques.
Deposits in transit.
Bank errors.
•
•
•
General Ledger
•
•
•
•
•
5
Non-sufficient funds
cheque (NSF).
Bank service charges.
Interest earned on
bank account.
Collections made by
the bank.
Book errors.
© 2013 McGraw-Hill Ryerson Limited.
LO 6
Let’s prepare the bank
reconciliation for VideoBuster
Company at the end of October 31,
2014.
6
© 2013 McGraw-Hill Ryerson Limited.
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Date
Cheques and
Debits
Number Amount
Oct 1
3
9
15
16
17
18
19
20
26
29
31
7
119
123
127
122
120
125
121
128
Bank Statement
Cash Receipts Journal
Deposit
Date
Amount
Oct 3 $
240.00
9
180.00
These items
15
100.00
Statement Date appear
31-Oct-14 on both the
16
150.00
Account Number 494 504 2
31
145.00
Cash Receipts
$
815.00
Total Deposits
Current
Journal and the
(101)
and Credits
Balance
bank
1,163.42
2,050.00 statement;
therefore, none of
Deposits and
Daily
these
items is a Cash Disbursements Journal
Credits
Balance
Amount
Amount
reconciling
item. Cheque #
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
1,609.58
1,794.58
1,949.58
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
119
120
121
122
123
124
125
126
127
128
$
$
55.00
200.00
120.00
70.00
25.00
150.00
15.00
200.00
50.00
135.00
1,020.00
(101)
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Total Cheques
and Debits
723.00
Date
Cheques and
Debits
Number Amount
26
29
31
8
119
123
127
122
120
125
121
128
These items
appear on both
Cash
Total Deposits the
Current
and Credits
Balance
Disbursements
1,163.42
2,050.00
Journal AND the
Deposits and
bank statement;
Daily
Credits
Balancenone of
therefore,
Amount
these1,609.58
items is a
240.00
1,794.58
reconciling
180.00
1,949.58 item.
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Oct 1
3
9
15
16
17
18
19
20
Bank Statement
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
100.00
150.00
485.00
8.42
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
Cash Receipts Journal
Deposit
Date
Amount
Oct 3 $
240.00
9
180.00
15
16
31
$
100.00
150.00
145.00
815.00
(101)
Cash Disbursements Journal
Cheque #
Amount
119
$
55.00
120
200.00
121
120.00
122
70.00
123
25.00
124
150.00
125
15.00
126
200.00
127
50.00
128
135.00
$
1,020.00
(101)
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Date
Cheques and
Debits
Number Amount
Oct 1
3
9
15
16
17
18
19
20
26
29
31
9
119
123
127
122
120
125
121
128
Bank Statement
These items appear
in the Cash
Statement Dateonly
31-Oct-14
Account Number
494 504 2 Journal OR
Receipts
the Cash
Total Deposits
Current
and Credits
Balance
Disbursements
1,163.42
2,050.00
Journal OR the bank
Deposits and
Daily
statement;
Credits
Balance
Amount therefore, each of
1,609.58
these
items is a
240.00
1,794.58
180.00reconciling
1,949.58
item.
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
100.00
150.00
485.00
8.42
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
Cash Receipts Journal
Deposit
Date
Amount
Oct 3 $
240.00
9
180.00
15
16
31
$
100.00
150.00
145.00
815.00
(101)
Cash Disbursements Journal
Cheque #
Amount
119
$
55.00
120
200.00
121
120.00
122
70.00
123
25.00
124
150.00
125
15.00
126
200.00
127
50.00
128
135.00
$
1,020.00
(101)
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Bank Statement
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Total Deposits
and Credits
1,163.42
Current
Balance
2,050.00
Date
Cheques and
Debits
Number Amount
Deposits and
Credits
Amount
Daily
Balance
Oct 1
3
9
15
16
17
18
19
20
26
29
31
10
119
123
127
122
120
125
121
128
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
1,609.58
1,794.58
1,949.58
1,999.58
2,126.58
2,541.58
2,341.58
2,326.58
The items that show
up only on the bank
statement are
reconciling items on
the book side of the
bank reconciliation.
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Bank Statement
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Total Deposits
and Credits
1,163.42
Current
Balance
2,050.00
Date
Cheques and
Debits
Number Amount
Deposits and
Credits
Amount
Daily
Balance
Oct 1
3
9
15
16
17
18
19
20
26
29
31
11
119
123
127
122
120
125
121
128
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
VIDEOBUSTER COMPANY
Bank Reconciliation
October 31, 2014
Book Balance
Add:
1,609.58
Collection of $500 note
1,794.58
less $15 collection fee
1,949.58
Interest earned
485.00
8.42
NSF cheque plus s/c
Cheque printing charge
30.00
23.00
1,999.58
2,126.58
2,541.58Less:
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
1,404.58
493.42
1,898.00
53.00
1,845.00
LO 6
National Bank
Hamilton, ON L8P 2X5
VideoBuster Company
901 Main Street
Hamilton, ON L8P 2J8
Bank Statement
Statement Date 31-Oct-14
Account Number 494 504 2
Previous
Balance
1,609.58
Total Cheques
and Debits
723.00
Total Deposits
and Credits
1,163.42
Current
Balance
2,050.00
Date
Cheques and
Debits
Number Amount
Deposits and
Credits
Amount
Daily
Balance
Oct 1
3
9
15
16
17
18
19
20
26
29
31
12
119
123
127
122
120
125
121
128
55.00
25.00
50.00
23.00 DM
70.00 CM
200.00
15.00
20.00 NSF
10.00 DM
120.00
135.00
IN
240.00
180.00
100.00
150.00
485.00
8.42
VIDEOBUSTER COMPANY
Bank Reconciliation
October 31, 2014
Book Balance
Add:
1,609.58
Collection of $500 note
1,794.58
less $15 collection fee
1,949.58
Interest earned
485.00
8.42
NSF cheque plus s/c
Cheque printing charge
30.00
23.00
1,999.58
2,126.58
2,541.58Less:
2,341.58
2,326.58
2,296.58
2,176.58
2,041.58
2,050.00
© 2013 McGraw-Hill Ryerson Limited.
1,404.58
493.42
1,898.00
53.00
1,845.00
LO 6
The items that show up
only on the Cash
Receipts or Cash
Disbursements Journal
are reconciling items on
the bank side of the
bank reconciliation.
13
Cash Receipts Journal
Deposit
Date
Amount
Oct 3 $
240.00
9
180.00
15
16
31
$
100.00
150.00
145.00
815.00
(101)
Cash Disbursements Journal
Cheque #
Amount
119
$
55.00
120
200.00
121
120.00
122
70.00
123
25.00
124
150.00
125
15.00
126
200.00
127
50.00
128
135.00
$
1,020.00
(101)
© 2013 McGraw-Hill Ryerson Limited.
LO 6
Cash Receipts Journal
Deposit
Date
Amount
Oct 3 $
240.00
9
180.00
15
16
31
VIDEOBUSTER COMPANY
Bank Reconciliation
October 31, 2014
Bank Balance
Add:
Deposit in transit
Less: Outstanding cheques
No. 124
No. 126
14
$
100.00
150.00
145.00
815.00
(101)
$ 2,050.00
145.00
2,195.00
$ 150.00
200.00
350.00
$ 1,845.00
Cash Disbursements Journal
Cheque #
Amount
119
$
55.00
120
200.00
121
120.00
122
70.00
123
25.00
124
150.00
125
15.00
126
200.00
127
50.00
128
135.00
$
1,020.00
(101)
© 2013 McGraw-Hill Ryerson Limited.
LO 6
The Final Product
VIDEOBUSTER COMPANY
Bank Reconciliation
October 31, 2014
Bank Balance
Add:
Deposit in transit
$ 2,050.00
145.00
2,195.00
Less: Outstanding cheques
$ 150.00
No. 124
350.00
200.00
No. 126
$ 1,845.00
Adjusted bank balance
15
Book Balance
Add: Collection of $500 note
less $15 collection fee
Interest earned
$ 1,404.58
$ 485.00
8.42
493.42
1,898.00
Less:
Cheque printing charge
NSF cheque plus fee
Adjusted book balance
© 2013 McGraw-Hill Ryerson Limited.
23.00
30.00
53.00
$ 1,845.00
LO 6
Recording Adjusting Entries
from the Bank Reconciliation
GENERAL JOURNAL
Date
Description
2014
Oct. 31 Cash
Collection expense
Notes Receivable
Page 8
PR
Debit
Credit
485.00
15.00
500.00
To record collection by bank
Oct. 31 Cash
Interest earned
8.42
8.42
To record collection by bank
16
© 2013 McGraw-Hill Ryerson Limited.
LO 6
Recording Adjusting Entries
from the Bank Reconciliation
GENERAL JOURNAL
Date
Description
2014
Oct. 31 Accounts Receivable - Heflin
Cash
Page 8
PR
Debit
Credit
30.00
30.00
To record NSF cheque plus s/c
Oct. 31 Office supplies expense
Cash
23.00
23.00
To record cheque printing charge
17
© 2013 McGraw-Hill Ryerson Limited.
LO 6
Recording Adjusting Entries from
Bank Reconciliation
After posting the reconciling entries the cash
account looks like this . . .
GENERAL LEDGER
Account:
Cash
Date
Acct. No.
Item
PR
Debit
Credit
101
Balance
DR (CR)
2014
Oct.
31
31
31
31
31
Balance
Adjusting entry
Adjusting entry
Adjusting entry
Adjusting entry
G8
G8
G8
G8
485.00
8.42
30.00
23.00
1,404.58
1,889.58
1,898.00
1,868.00
1,845.00
Adjusted balance on October 31
18
© 2013 McGraw-Hill Ryerson Limited.
LO 6