Bank Reconciliation Process

Introduction

• Presenter: Jonathan Wild
• Topic: How to prepare a bank reconciliation
• Date of Reconciliation: As of August 31

Bank Balance Adjustments

1. Initial Bank Balance
   • Bank balance from statement: $10,250
2. Add Deposits in Transit
   • Deposited $725 on August 31 (not yet reflected in bank balance)
3. Subtract Outstanding Checks
   • Outstanding check: $1,750 (written but not cashed)
4. Compute Adjusted Bank Balance
   • Adjusted Bank Balance: $9,225

Book Balance Adjustments

1. Initial Book Balance
   • Book balance on records: $7,025
2. Add Interest and Unearned Cash Receipts
   • Interest earned: $40
   • Note receivable collected by bank: $2,425
3. Subtract Bank Fees and NSF Checks
   • Bank service charge: $115
   • NSF check: $150
4. Compute Adjusted Book Balance
   • Adjusted Book Balance: $9,225
   • Adjusted balances match: $9,225

Post-Reconciliation Journal Entries

1. Record Interest Earned
   • Debit Cash $40
   • Credit Interest Revenue $40
2. Record Collection of Note Receivable
   • Debit Cash $2,425
   • Credit Notes Receivable $2,425
3. Record Bank Service Charge
   • Debit Miscellaneous Expenses $115
   • Credit Cash $115
4. Record NSF Check
   • Debit Accounts Receivable $150
   • Credit Cash $150
   • Reinstates accounts receivable

Important Notes

• Journal entries are needed only for items affecting the book balance.
• Each journal entry will impact the Cash account.
• Ensure accuracy by matching adjusted bank balance with adjusted book balance.