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Section 2Reconciling the Bank Account PowerPoint PPT Presentation


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Chapter 11. $. 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.

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Section 2Reconciling the Bank Account

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Section 2 reconciling the bank account

Chapter 11

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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.

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Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Why It’s Important

Reconciling the bank account ensures that a business owner is aware of all transactions that affect cash.

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  • 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)

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Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Proving Cash

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General Ledger

Cash in

Bank account

Checkbook

Balance

=

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Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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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.

When a bank sends a statement to a depositor, it may return the checks paid by the bank and deducted from the depositor’s account. These returned checks are called cancelled checks.

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Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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The Bank Statement (con’t.)

Ending balance

Beginning balance

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Checks paid by bank

(cancelled checks)

Other

deductions

Deposits into

the account


Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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The Bank Statement (cont.)

  • The process of determining any differenced between the bank statement and the checkbook is called reconciling the bank statement.

  • Outstanding checks are checks that have been written but have not yet been presented to the bank for payment.

  • Outstanding deposits are deposits that have been made and recorded in the checkbook but do not appear on the bank statement.

  • A bank service charge is a fee the bank charges for maintaining bank records and processing bank statement items for the depositor.

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Section 2 reconciling the bank account

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Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Reconciling a Bank Statement

Documents the differences between the bank balance and the checkbook balance.

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Section 2 reconciling the bank account

Closing Entry (con’t.)

On November 1 Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement.

JOURNAL ENTRY

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Recording Bank Service Charges

A bank service charge is an expense that is recorded in the accounting records.

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Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Special Banking Procedures

Stop payment order is a demand by the drawer that the bank not honor a certain check.

An NSF check is a check returned to the depositor by the bank because there are not sufficient funds in the drawer’s checking account to cover the check.

Banks use electronic funds transfer system (EFTS) to transfer funds among accounts quickly and accurately without the exchange of checks. An example is on p272, Figure 11-15.

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Section 2 reconciling the bank account

Section 1Banking Procedures (con’t.)

Chapter 11

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Demonstration Problems

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Problems 11-3 to 11-5.

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Section 2 reconciling the bank account

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  • 3,172.50

  • 24.50

  • 3148.00

731

245.--

742

88.--

745

461.--

1242.--

2700.--

3942.--

794.--

3148.--

794.--


Section 2 reconciling the bank account

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20--

Aug 8

Miscellaneous Expense

12.75

Cash in Bank

12.75

July Bank Statement


Section 2 reconciling the bank account

24

20--

Aug 21

Accounts Receivable-Fran Alexander

98.45

Cash in Bank

98.45

NSF Check


Section 2 reconciling the bank account

Section 2Reconciling the Bank Account (con’t.)

Chapter 11

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Assignment

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  • Check Your Understanding

  • Thinking Critically 1&2

    • 1 is worth 5 points

    • 2 is worth 4 points

  • Problem 11-2

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