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Checking Account Reconciliation

Read the following information about bank statements. Then complete the activities as directed. Compare your answers with those of a classmate.

Bank Statements

The bank provides a form on the bank statement that you can use to reconcile your account. To reconcile your checking account, you need to know:

·  The balance at the end of the period that the bank statement covers. This is usually called the Closing Balance from Statement.

·  The sum of the deposits you made that are not listed on the bank statement. These deposits are called outstanding deposits. They were likely made after the closing date on the bank statement.

·  The sum of the checks that you wrote but have not yet been processed at the bank. These checks are called outstanding checks.

·  The interest your account earned, if any.

·  The sum of the service charges, if any, that the bank deducted from your account.

·  The balance in your check register.

Study the following example and the sample reconciliation form on the next page.

Example: Susie just received her monthly bank statement. She is preparing to reconcile her check register balance with the closing balance on the bank statement. The information she noted by reviewing her check register and bank statement is as follows:

·  Her closing balance from the statement is $515.15. (Enter on line 1.)

·  She made a $35 deposit after the bank statement closing date. (Enter on line 2.)

·  Her check register balance is $504.65 after she deducted this month’s service charge of $2.35 in her check register.

·  The sum of her outstanding checks is $45.50. (Enter on line 4.)

Her completed reconciliation is shown on the following page.

Account Reconciliation Form
Amount
1. Enter the Closing Balance from Statement. / $515.15
2. Enter the sum of all deposits not listed on the bank statement. / 35.00
3. Enter the sum of the amounts in steps 1 and 2. / 550.15
4. Subtract the sum of outstanding checks and fees not listed in your check register. / 45.50
5. Subtract amount in step 4 from amount in step 3.* / $504.65
*The amount in step 5 should equal the amount in your check register.

Does the amount in step 5 equal her check register balance? If yes, Susie has reconciled her balances successfully. If not, Susie needs to investigate why the amount is different from her check register amount. Did she make an error in her check register? Are the amounts on the reconciliation form correct? Is the bank statement balance incorrect? If Susie has reconciled correctly, she should have $504.65 in her checking account.

Activity 1

Using the information and form below, reconcile the closing balance from the bank statement and the check register balance.

·  The bank statement balance is $4,506.76.

·  Deposits totaling $576.46 were made after the bank statement closing date.

·  The check register balance is $4,738.24 after a $5.50 service fee is deducted and $1.25 is added for the interest earned this month.

·  The total of the outstanding checks is $344.98.

Account Reconciliation Form
Amount
1. Enter the Closing Balance from Statement. / $4,506.75
2. Enter the sum of all deposits not listed on the bank statement. / $576.46
3. Enter the sum of the amounts in steps 1 and 2. / $5,083.22
4. Subtract the sum of outstanding checks and service charges not listed in your check register. / $344.98
5. Subtract amount in step 4 from amount in step 3.* / $4,738.24
*The amount in step 5 should equal the amount in your check register.

Does the amount in step 5 equal the check register balance of $4,738.24? YES

Activity 2

Using the information and form below, reconcile the closing balance from the bank statement and the check register balance.

·  The bank statement balance is $2,345.67.

·  Deposits totaling $431.45 were made after the bank statement closing date.

·  The check register balance is $2,496.97, but a $2.25 service fee has not been deducted and $1.25 interest earned this month has not been added in the check register.

·  The total of the outstanding checks is $278.90.

Account Reconciliation Form
Amount
1. Enter the Closing Balance from Statement. / $2,345.87
2. Enter the sum of all deposits not listed on the bank statement. / $431.45
3. Enter the sum of the amounts in steps 1 and 2. / $2,777.12
4. Subtract the sum of outstanding checks and service charges not listed in your check register. / $281.15
5. Subtract amount in step 4 from amount in step 3.* / $2,495.97
*The amount in step 5 should equal the amount in your check register.

Is the check register balance reconciled with the closing balance from statement? NO

If not, what should the check register balance be?

$2,495.97 ($2,496.97 + $1.25 interest - $2.25 service fee)

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