Page 28 - CalcBus_Flipbook

3-18 Everything Decimals CH 3]

Why reconcile
The purpose of reconciling is to locate any differences between the bank’s statement of
Bank Statement: A your account and your check register and cause them both to come into balance with each
printed record of the other; that is your bank statement equals you check register. As the bank statement is
balance in a bank compiled it is sent to you for your records while you are still engaging in transactions and as
account and the such will not equal your check register when you receive it.
amounts that have Reconciling allows you to spot any errors made by the bank or yourself in recording
been paid into it and
withdrawn from it, transactions. Common errors include recorded transactions overlooked and correcting the
issued periodically to values to the value of the transactions (eliminating the transposition of numbers). In brief, a
the holder of the bank reconciliation is needed to ensure that your checking account balance is correct
account. Individuals and business firms must track their funds to have a clear picture of their
financial health. Bank statement reconciliations are a tool used in a proper cash
management process.
The process of preparing a bank reconciliation involves making adjustments to the
balances in both the bank statement and the individual/company’s records to confirm that
the ending balances match and that every item is properly accounted for in both. It is
important to prepare bank reconciliations in a timely and regular basis (monthly, for
example), so if questions regarding bank fees or errors arise both, yourself and the bank can
be made aware as soon as possible.
Because of the lag time between deposits made and checks written, and their actual
posting to the account, it is rare for the ending balances to match. Reconciliation ensures all
transactions are accounted for, and provides a true cash balance.

Reconciling: Parts of the Bank Statement
Comparing the For this discussion your need to refer to Figure 3.10. This Bank of America bank
bank's records of statement is for an Interest earning Checking account (Tiered Interest Chkg), and the time
account activity with period is from 24 March 20xx to 20 April 20xx. The account belongs to Paul Overland and
your own records of
activity for the same Lauri Overland.
account and The first part of the statement is a summary of financial transactions titled “Account
balancing each to summary.” It has in it the Beginning balance on March 24, 20xx ($8,057.18), then the total
the same value. value of all Deposits to the account in the amount of $9,514.61. Adding these two numbers
together, Beginning Balance and Deposits indicates the total amount of money the account
holder had available during the dates of the statement, in this case ($8,057.18 + $9,514.61 =)
$17,571.79.
Next all ATM and debit card transactions (0.00) are subtracted from the total available.
The next subtraction in this summary is for other subtractions which would be internet
activity, $2,428.33.
This bank statement then identifies the total of Checks that have been written and
cleared the bank which are also subtracted. In this figure this amounts to $3,825.11.
The last item in the summary are the total value of the service fees the bank charges the
account holder. In this example this amounts to $4.40.
The arithmetic of this summary calculates an Ending Balance on April 20, 20xx in the
amount of $11,313.95.
Following the summary is a detailed report of each area which the Summary addresses.

Deposits and other additions
In this subsection of the Bank Statement is a detailed report of funds deposited to the
account, date of the deposit, identifying employee information and the amount of each
deposit. In the example we note that the two deposits are made electronically and their
individual amounts totaling $9,514.61.

Withdrawals and other subtractions
Other subtractions. Note that this section includes date of transaction, description of
the transaction and the amount of each transaction. Also note that these are electronic
(internet) transfers of money as there is no check number for these. This subsection tallies a
total value of $2,428.33.
Checks are the next section of this Bank Statement. In this report the checks are
identified by the date they clear the bank and not the date the check is written, the check
number without memoranda or identification of to whom the check was written, and lastly

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