Step Bank
Step Bank
Bank charges are service charges and fees deducted for the bank’s processing of the business’ checking account activity.
This can include monthly charges or charges from overdrawing your account. They must be deducted from your cash
account. If you’ve earned any interest on your bank account balance, they must be added to the cash account.
An NSF (not sufficient funds) check is a check that has not been honored by the bank due to insufficient funds in the
entity’s bank accounts. This means that the check amount has not been deposited in your bank account and hence needs to
be deducted from your cash account records.
Errors in the cash account result in an incorrect amount being entered or an amount being omitted from the records. The
correction of the error will increase or decrease the cash account in the books.
4. COMPARE THE BALANCES
After adjusting the balances as per the bank and as per the books, the adjusted amounts should be the same. If they are still not equal,
you will have to repeat the process of reconciliation again.
Once the balances are equal, businesses need to prepare journal entries for the adjustments to the balance per books.
Detecting errors such as double payments, missed payments, calculation errors etc.
Tracking and adding bank fees and penalties in the books Spot fraudulent transactions and theft and Keeping track of accounts payable and
receivables of the business
Electronic funds transfer (EFT) refers to the deposit to bank account by means of wire, direct deposit, ACH or other electronic means.
ACH stands for Automated Clearing House, a U.S. financial network used for electronic
payments and money transfers. Also known as “direct payments,” ACH payments are a way to
transfer money from one bank account to another without using paper checks, credit card networks,
wire transfers, or cash.
Cash short and over refers to an expense account used to disclose shortages and overages to an
impressed account like petty cash, cash sale and credit collection by mail
The accounting system will show $95 in posted sales but $96 of collected cash. The one-dollar
difference goes to the cash-over-short account. The journal entry for this sale would
debit cash for $96, credit sales for $95, and credit cash over short for $1.
EA 1.
EA 2.
EA 3.
EA 4.
EA 5.
EA 6.
EA 7.
EA 10.
Prepare the journal entry to reconcile the bank statement in Exercise 8.9.
EA 12.
Prepare the journal entry to reconcile the bank statement in Exercise 8.11.