CENTURY 21 ACCOUNTING © Thomson/South-Western

LESSON 5-2LESSON 5-2

Bank Reconciliation

Original created by M.C. McLaughlin, Thomson/South-WesternModified by Deborah L. Burns, Johnston County Schools, West Johnston High School

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

BANK STATEMENTBANK STATEMENT page 124

A report of deposits, withdrawals, and bank balances sent to a depositor by a bank is called a bank statementThe bank stamps the checks to indicate the checks are canceled & are not to be transferred furtherCanceled checks may be returned to a depositor with a bank statement or may be kept on record by the bank

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

BANK RECONCILIATION ADJUSTMENTSBANK RECONCILIATION ADJUSTMENTS page 124

A bank’s records & a depositor’s records may differ for several reasons:

A service charge may not have been recorded in the depositor’s business recordsOutstanding deposits may be recorded in the depositor’s records but not on a bank statementOutstanding checks may be recorded in the depositor’s records but not on a bank statementA depositor may have made math or recording errors

CENTURY 21 ACCOUNTING © Thomson/South-Western

BANK STATEMENT RECONCILIATIONBANK STATEMENT RECONCILIATION

A bank statement is reconciled by verifying that information on a bank statement & a checkbook are in agreement

Reconciling immediately after receiving the statement is an important aspect of cash control

Look for differences between what’s on the books and what’s on the statement

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LESSON 5-2

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

5.Bank Statement Balance

BANK STATEMENT RECONCILIATIONBANK STATEMENT RECONCILIATION

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55

66

77

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9.Adjusted Bank Balance

page 125

2.Check Stub Balance

10. Compare Adjusted Balances

1.Date

3.Service Charge4.Adjusted Check Stub Balance

6.Outstanding Deposits7.Subtotal8.Outstanding Checks 1010

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

RECORDING A BANK SERVICE CHARGE RECORDING A BANK SERVICE CHARGE ON A CHECK STUBON A CHECK STUB page 126

Although the business does not write a check for a bank service charge, this cash payment must be recorded in the accounting records as a cash paymentA record of a bank service charge is made on a check stub

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

1. Write Service Charge $8.00 on the check stub under the heading “Other.”

RECORDING A BANK SERVICE CHARGE RECORDING A BANK SERVICE CHARGE ON A CHECK STUBON A CHECK STUB page 126

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2. Write the amount of the service charge in the amount column.

3. Calculate and record the new subtotal on the Subtotal line.

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

JOURNALIZING A BANK SERVICE JOURNALIZING A BANK SERVICE CHARGECHARGE page 127

Because the bank service charge is a cash payment for which no check is written, a memorandum is prepared as the source documentSince service charges are relatively small & occur only once a month they are recorded as a miscellaneous expense

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

1. Write the date.

JOURNALIZING A BANK SERVICE JOURNALIZING A BANK SERVICE CHARGECHARGE page 127

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August 31. Received bank statement showing August bank service charge, $8.00. Memorandum No. 3.

2. Write the title of the account debited. Record the debit amount.

3. Write the title of the account credited. Record the credit amount.

4. Write the source document number in the Doc. No. column.

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CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 5-2

TERM REVIEWTERM REVIEW

bank statement

page 128