Section 2Reconciling the Bank Account What You’ll Learn  Why a business reconciles a bank statement.  How to journalize and post entries relating to bank service charges.  The accounting procedure for stopping payment on a check.  How to record an NSF check.  How electronic funds transfer systems enable banks to transfer funds quickly and accurately. What You’ll Learn  Why a business reconciles a bank statement.  How to journalize and post entries relating to bank service charges.  The accounting procedure for stopping payment on a check.  How to record an NSF check.  How electronic funds transfer systems enable banks to transfer funds quickly and accurately.

Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Why It’s Important Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash. Section 2Reconciling the Bank Account (cont'd.) Key Terms  bank statement  canceled checks  reconciling the bank statement  outstanding checks  outstanding deposits Key Terms  bank statement  canceled checks  reconciling the bank statement  outstanding checks  outstanding deposits  bank service charge  stop payment order  NSF check  electronic funds transfer system (EFTS)  bank service charge  stop payment order  NSF check  electronic funds transfer system (EFTS)

Proving Cash Section 2Reconciling the Bank Account (cont'd.) General Ledger Cash in Bank account General Ledger Cash in Bank account Checkbook Balance Checkbook Balance = =

The Bank Statement A bank statement is an itemized record of all the transactions in a depositor’s account over a given period, usually a month. Section 2Reconciling the Bank Account (cont'd.)

The Bank Statement (cont'd.) Section 2Reconciling the Bank Account (cont'd.) Beginning balance Beginning balance Checks paid by bank (cancelled checks) Checks paid by bank (cancelled checks) Other deductions Other deductions Deposits into the account Deposits into the account Ending balance Ending balance

Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. Section 2Reconciling the Bank Account (cont'd.)

Business Transaction (cont’d.) JOURNAL ENTRY On November 1, Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement. Section 2Reconciling the Bank Account (cont'd.) Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records.

Check Your Understanding List the standard information that appears on a bank statement. Section 2Reconciling the Bank Account (cont'd.)