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Bank Reconciliations and Journalizing
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Hi, today we are going to learn how to do a bank reconciliation.
Remember the bank reconcilation is done at the end of every month and what we're trying to do is figure out how much
actual cash we have. When we get our bank statement in the mail, the bank statement says we have a certain amount of money
But out general ledger account
says that we have another amount of money, rarley do those two match.
the purpose of the bank reconciliation then is to reconcille
those two numbers and find out exactly how much cash we have. What we're going to do is draw an outline to help us
facillitate that bank reconcilliation so
the first thing we are going to do is we are going to write
a cash balance per bank statement
Then we are going to add some things to that and we're going to subtract some things
to get an adjusted balance per bank
Down below that we're going to continue, but we are going to do it for books.
So we have cash balance per our books
this is for our general ledger. Then we're going to add some things
and we're going to subtract some things to get an adjusted
balance per books
We're looking at our bank statement, and our bank statement shows that we have
$1,000
it says that we have $900
we need to reconcille these two numbers
if we're looking at our general ledger cash account then, this is our general ledger
it's showing we have $900
The other thing that is on our bank statement , so we're going back to our bank statment and we're looking at it.
Our bank statment shows that we have a note that the bank collected for us
So the bank collected a note
from one of our customers. Instead of the customer
sending us a check in the mail, it sent it directly to our bank and the bank
then deposited it to our account and the note that was collected
the amount was $150
and we're going to add that to our balance in our bank statement
or excuse me, to our general ledger accout. The bank has already added it to this number
and we want to add it to our general ledger cash account . The other thing that was on our bank statment
were two charges that they charged us and reduced our account.
The first thing the bank charged us for was for monthly bank charges. Those monthly bank charges were $25.
We're going to subtract those out.
The other thing that was on the bank statement that we looked at was a check
that one of our customers wrote us that bounced .The bank then reduced our account
for that bounced check. This is called an NSF check and this is from one of our customers
let's say it's from Jay Little. The check amount
was $175, so quite a bit of money that bounced. We're going to reduce
our general ledger book account by those two charges and then also
we're going to increase it for the note that was collected from our customer.
If we add from the $900 add the $150
and we subtract out these two charges, that gives us an adjusted balance
in our books of $850. So let's go back up to the
top here, and look at some things that might have affected our bank statement balance.
One of the things is
checks that we wrote that have not cleared
the bank yet. We know we wrote them
we've already taken them out of this number, but they haven't cleared the bank
and we want to subtract those out of that bank statement balance
There's $200
The other thing that we know happened but is not included on the bank statement balance
yet is a deposit we made and that deposit may have been made
like after three o'clock on a business day. That deposit
will not show up until the following business day. So as of the date
of this bank statement the bank is not showing it included in this number
and that was for $50. We're going to
add that to the bank statment balance. This will give us an adjusted
balance per the bank of $850
So, $1,000 plus the deposit transit less those outstanding checks
gives us $850. Notice that both of these numbers match
and they have to match in order for us
to show that we have reconcilled our account. We really have $850
but right now
the cash in our general ledger account is still showing $900
we need to make some adjustments
and we're going to make adjustments
for this note that was collected. We're going to make and adjustment for the bank charges
and we're going to make an adjustment for that NSF check
written by one of our customers. So we go to our general journal
and we make up a general journal page
here on the board anyway. Let's say that
this was made as the date of the reconciliation. Let's say it was October 31st
and the first one was for this note
that was collected. So cash went up, and cash went up
So we're going to debt cash $150. We're going to reduce or credit
our note receivable account for that $150.
so this was for note collected, so we've recorded that $150
and when we post that as a debit
to our cash account. It's increasing our general ledger account.
The next adjustment we might need to make
is for these two subtractions. So we skip a line. The first one
is for the bank charges. We are going to go ahead and call it bank charges or bank charges expense
or bank service charges. Since I don't have a lot of space
I'm going to call it bank charges. Our bank charges were $25.
We also have an NSF check.
We do not have an account called NSF check.
This is really a customer's check that bounced. That customer
still owes us money. So we are going to debit
our accounts receivable for Jay Little. I'm going to abbreviate
though I don't like to do that, but I'm going to do that here because I'm running out of room. So that was for the $175
bad check. He still owes us the money we want to make sure we debit
his accounts receivable. Then we're going to reduce our cash account
by those two numbers. That's a total of 200. We're going to go ahead and
post this journal entry
and that reduces our general ledger account by 200.
After posting then, we should show
a correct adjusted balance of $850.
and we are done with our bank reconciliation.
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