Exercise to determine the items that must be included on the bank reconciliation, thereby allowing you to discover how to prepare a reconciliation.
Write “Cash Balance on Bank Statement” and “Cash Balance on Depositor’s Records” on opposing sides, or top and bottom halves, of a piece of paper.
Identify what items can cause these two totals to disagree when the bank statement is received. Determine whether these items are adjustments to the bank statement balance or the depositor’s balance, and whether they are additions or deductions. Indicate the addition or subtraction and the item description under each appropriate heading.
Tasks to complete:
Set up the headings on a piece of paper
Indicate the item and whether it increases or decreases the appropriate heading item.
Be sure to properly label all items in the calculation.
|Cash Balance on Bank Statement||Cash Balance on Depositor's Records|
|Deposits in transit/not recorded by bank||+||Amounts collected directly by bank||+|
|Outstanding checks||-||Interest credited by bank||+|
|Errors in recording made by bank||+/-||Amounts directly paid by bank against standing orders||-|
|NSF checks returned by customers||-|
|Bank service charges||-|
|Errors in recording in books||+/-|
Note: Items that increase the balance have been shown with '+' while items that decrease the balance have been shown with '-'.
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