A BANK RECONCILIATION

The check numbers of all check written are kept track of in the cash disbursements journal so that when the bank sends its end-of-the-month bank statement, you can check off which checks have cleared (or gone through) your bank and have been subtracted out of your account.  When this bank statement come, you will need to make a bank reconciliation to make sure that you have entered everything correctly--that the bank has also--and that both the bank and you agree to the balance shown on the bank statement.   It is unusual for the bank to make an error, so when your reconciliation doesn't agree with the bank statement, it is best to check where YOU may have made an error before you assume that the bank is in error.

An example of a bank statement is shown in Figure 3 of the visual handout.  A bank reconciliation form and a Cash Disbursements Journal showing entries which correspond to the bank statement are in Figure 4.  Compare these three forms to see how the reconciliation has been done.  The company has compared the bank statement to the Cash Disbursements Journal to check off checks on the statement.

The steps to take to reconcile a bank statement are shown on the copy of a bank reconciliation form on Figure 4.  Notice on the Cash Disbursements Journal that the End-of-Month Balance shown includes the deduction of the bank service charges.  These service charges would be shown also as miscellaneous expenses in another column on the Cash Disbursements Journal, or the company could make an account showing banking expenses to show the service charges.

Now start on the Job Assignments.