1. Bank Reconciliation Objective 4.02D Students will understand and complete the bank reconciliation process.

2. Bank Reconciliation What is a bank reconciliation? Document that shows two equal balances – Your record of your checking account – The bank’s record of your account Do they have the same $ balance? – Yes, or reconciliation is not complete! – Reconciliation helps to find/correct any mistakes in your register!

4. Cancelled or Cleared Checks Examples Check that has processed through the bank Payment has been deducted from drawer’s account

5. Outstanding Checks What is an outstanding check? Outstanding checks are checks that have not cleared (been deducted from) the bank statement balance. Need to know items outstanding in order to reconcile statement How to know if checks are outstanding: – Find out which checks are outstanding by comparing the bank statement with the checkbook register

6. Outstanding Deposits What are outstanding deposits? Deposits that have been made, but are not yet on the bank statement. They are deposits that have not been added to the bank statement balance. The bank (should) know your money is there, but your statement was mailed before your deposit was processed. How to know if deposits are outstanding: – Compare the bank statement with the checkbook register to see which deposits are missing from the bank statement. – These amounts must be added to the bank statement balance during the reconciliation process.

7. Reconciling a Checkbook Purpose: to make sure the bank’s records agree with your records 1. Look for outstanding checks and deposits 2. Review checks, deposits, ATM activity on the bank statement to make sure that your records are correct 3. Make adjustments to the bank statement and your records to ensure that you and the bank have the same amount of money 4. Reconcile every statement upon receipt in case there are mistakes 7

8. Steps in a Bank Reconciliation 1.Obtain the monthly bank statement. 2.Determine checks paid. (Tick mark items) 3.Find differences between the monthly bank statement and monthly check register. 4.Calculate the adjusted balance. 5.If the balances do not agree, check the steps again and recalculate. 6.Account balances must be equal!

9. Example Reconciliation Checkbook Balance  Subtract Service charges Paper statement fees  Add Interest earned Adjusted Checkbook Balance Bank Statement Balance  Add Outstanding deposits  Subtract Outstanding checks Adjusted Bank Statement Balance The adjusted balances should equal at the end of the process!!!