Master bank reconciliations with free practice questions covering outstanding cheques, deposits in transit, NSF cheques, bank errors, and required journal entries.
Start practising now — it's free Read study guidesA bank reconciliation compares a company's cash account balance to the bank statement balance, identifying and explaining all differences. It is one of the most important internal controls over cash and tested consistently in introductory and intermediate accounting courses.
Differences arise from timing differences (outstanding cheques not yet cleared, deposits in transit not yet credited) or from items the company has not yet recorded (bank charges, interest earned, NSF cheques returned). The goal is to arrive at an adjusted balance that both the book and bank records agree to.
Items requiring adjusting journal entries in the company's books must be recorded immediately. Outstanding cheques and deposits in transit do not require entries — they are timing differences that will clear in the next period.
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