Section 2 Reconciling the Bank
Account
What You’ll Learn
 Why a business reconciles a bank
statement.
 How to journalize and post entries
relating to bank service charges.
 The accounting procedure for stopping
payment on a check.
 How to record an NSF check.
 How electronic funds transfer systems
enable banks to transfer funds quickly
and accurately.
Section 2 Reconciling the Bank Account (con’t.)
Why It’s Important
Reconciling the bank account
ensures that a business owner is aware
of all transactions that affect cash.
Key Terms
 bank statement
 canceled checks
 reconciling the
bank statement
 outstanding checks
 outstanding
deposits
 bank service
charge
 stop payment
order
 NSF check
 electronic funds
transfer system
(EFTS)
Section 2 Reconciling the Bank Account (con’t.)
Proving Cash
General Ledger
Cash in
Bank account
=
Checkbook
Balance
Section 2 Reconciling the Bank Account (con’t.)
The Bank Statement
A bank statement is an itemized
record of all the transactions in a
depositor’s account over a given
period, usually a month.
When a bank sends a statement to
a depositor, it may return the checks
paid by the bank and deducted from
the depositor’s account. These
returned checks are called cancelled
checks.
Section 2 Reconciling the Bank Account (con’t.)
The Bank Statement
(con’t.)
Ending balance
Beginning balance
Checks paid by bank
(cancelled checks)
Other
deductions
Deposits into
the account
Section 2 Reconciling the Bank Account (con’t.)
The Bank Statement (cont.)
 The process of determining any differenced
between the bank statement and the checkbook is
called reconciling the bank statement.
 Outstanding checks are checks that have been
written but have not yet been presented to the bank
for payment.
 Outstanding deposits are deposits that have
been made and recorded in the checkbook but do
not appear on the bank statement.
 A bank service charge is a fee the bank
charges for maintaining bank records and
processing bank statement items for the depositor.
Section 2 Reconciling the Bank Account (con’t.)
Reconciling a Bank Statement
Documents the differences between
the bank balance and the checkbook
balance.
2
3
4
5
6
7
Section 2 Reconciling the Bank Account (con’t.)
Recording Bank Service Charges
A bank service charge is an expense
that is recorded in the accounting
records.
Closing Entry (con’t.)
On November 1 Roadrunner received the bank statement.
A bank service charge of $8 appeared on the statement.
JOURNAL ENTRY
Section 2 Reconciling the Bank Account (con’t.)
Special Banking Procedures
Stop payment order is a demand by the
drawer that the bank not honor a
certain check.
An NSF check is a check returned to
the depositor by the bank because
there are not sufficient funds in the
drawer’s checking account to cover the
check.
Banks use electronic funds transfer
system (EFTS) to transfer funds among
accounts quickly and accurately
without the exchange of checks. An
example is on p272, Figure 11-15.
Section 1 Banking Procedures (con’t.)
Demonstration Problems
Problems 11-3 to 11-5.
3,172.50
-24.50
1
3148.00
2
3
4
5
6
7
1242.-2700.-3942.-794.-3148.--
731
742
745
245.-88.-461.--
794.--
21
20-Aug 8 Miscellaneous Expense
Cash in Bank
July Bank Statement
12.75
12.75
24
20-Aug 21 Accounts Receivable-Fran Alexander
Cash in Bank
NSF Check
98.45
98.45
Section 2 Reconciling the Bank Account (con’t.)
Assignment
Check Your Understanding
•Thinking Critically 1&2
1 is worth 5 points
2 is worth 4 points
•Problem 11-2