Bank Reconciliation
A bank account is an account a company opens with a bank, into which cash is deposited for safekeeping and from which cash is withdrawn primarily by writing checks. The term bank reconciliation means accounting for the difference between the balances that appear on the bank statement and in the company’s Cash account. It involves adjusting both balances to arrive at the adjusted cash balance.
The bank balance is adjusted for:
- outstanding checks.
- deposits in transit, and
- any bank errors.
The depositor’s book balance is adjusted for
- service charges,
- NSF checks,
- interest earned, and
- miscellaneous debits and credits.