Question

Part I

In your own words, explain what a bank reconciliation is. For just this part, imagine the person you are explaining this to has never taken an accounting class and that his or her banking experience is strictly limited to managing his or her personal checking account. Feel free to discuss or summarize the different sections of a bank reconciliation if you feel this would be helpful. Try to capture the essence of why bank reconciliations are important and how they are done.

Part II

(1) Why don’t we make journal entries for bank errors?

(2) Why do we bother including deposits in transit and outstanding checks? Won’t they just “work themselves out” the following month?

(3) Why is Adjusted balance on the bank reconciliation twice?

Answer 1

Bank reconciliation is identifying those transaction which have not been reflected in the bank statement or in our bokks due to timing differance or various other errors.

a bank reconciliation statement is a process that explains the difference on a specified date between the bank balance shown in an organization'sbank statement, as supplied by the bank and the corresponding amount shown in the organization's own accounting records.

1. Journal Entries are not passed as these are timing difference and eventually get corrected in due course of operation of Bank.

2. They will work themselfs out in the following months, but as we are preparing the receonciliation statement for a particular date these are the reasons for difference as on that date.

3. balance on books is adjusted to find the balance as per bank statement and viceversa.