1. 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.

2. 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 (con’t.) 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)

3. Proving Cash Section 2Reconciling the Bank Account (con’t.) General Ledger Cash in Bank account General Ledger Cash in Bank account Checkbook Balance Checkbook Balance = =

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

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

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

7. Reconciling a Bank Statement Documents the differences between the bank balance and the checkbook balance. Section 2Reconciling the Bank Account (con’t.) 2 3 6 4 5 7

8. Recording Bank Service Charges A bank service charge is an expense that is recorded in the accounting records. Closing Entry (con’t.) JOURNAL ENTRY On November 1 Roadrunner received the bank statement. A bank service charge of $8 appeared on the statement.

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

10. Demonstration Problems Problems 11-3 to 11-5. Section 1Banking Procedures (con’t.)

11. 2 3 6 4 5 7 1 3,172.50 -24.50 3148.00 731245.-- 74288.-- 745461.-- 794.-- 1242.-- 2700.-- 3942.-- 794.-- 3148.--

12. Aug 8Miscellaneous Expense12.75 Cash in Bank 12.75 20-- July Bank Statement 21

13. Aug 21 Accounts Receivable-Fran Alexander 98.45 Cash in Bank 98.45 20-- NSF Check 24

14. Assignment Check Your Understanding Thinking Critically 1&2 1 is worth 5 points 2 is worth 4 points Problem 11-2 Check Your Understanding Thinking Critically 1&2 1 is worth 5 points 2 is worth 4 points Problem 11-2 Section 2Reconciling the Bank Account (con’t.)