| Bank reconciliation statement as of July 1, 19—: | |||
| Bank balance as per bank’s statement | $ 675.00 | ||
| Add: | |||
| Deposit not included in above balance | $350.00 | ||
| Bank charge not included in our balance—protest fees | 7.50 | 357.50 | |
| $1,032.50 | |||
| Deduct: | |||
| Outstanding checks | $180.00 | ||
| Bank interest, not included in our balance | 16.67 | 196.67 | |
| Balance as per cash book | $ 835.83 | ||
It will be seen that neither the cash book balance nor the bank balance is a correct statement of the cash available for checking. The depositor, in order to find this amount, will have to take account of the figures given by the bank for items he has not known about. His checking balance in the above problem is ascertained as follows:
| Cash book balance | $835.83 |
| Less—Bank charges (expenses to the depositor) | 7.50 |
| $828.33 | |
| Plus—Bank credits (income to the depositor) | 16.67 |
| True balance available for checking | $845.00 |
There is not usually so much difficulty in reconciling the bank account; but where several bank accounts are maintained, it is easy to misplace debits and credits and a formal statement of reconciliation should always be made and kept as a part of the record. This reconciliation should be made every time a statement is received from the bank. The frequency of asking for a statement of account from the bank depends somewhat upon the volume of transactions handled through the bank, but it should be secured at least every month and particularly whenever formal statements of profit and loss and balance sheet of the depositor are made up.
Reconciliation Statement a Permanent Record.—The reconciliation statement should be made as a permanent record. A customary place of record is on the check stub of the same date. Where a check register is used, it should be made a part of the record there. Occasionally it is incorporated in the cash book. Wherever made it should be easily available for proof at a subsequent period. When reconciliation is to be made as of a past date, i.e., at a time subsequent to the date on which reconciliation is desired, the bank’s cancellation date on the returned checks must be used to determine what checks were outstanding on that date.
Reconciling Other Accounts.—Occasionally the dealings between two firms located at a distance from each other may be such that items are in transit one or both ways at the time when statement of account is rendered. If this is the case, the methods of reconciliation applied above to the bank account may have to be used before agreement or comparison of the two records can be effected.
CHAPTER LI
BALANCING METHODS
The “Fool-Proof” Trial Balance.—Double-entry bookkeeping is never satisfied with anything short of absolute proof of the mathematical accuracy of the work. Often such proof is very difficult to secure. There has not yet been devised—and in the nature of things, never will be—any so-called royal road to the trial balance. Yet one often sees claims put forth that there is no longer any need for trial balance troubles. The use of certain methods, which are disclosed only upon payment of fees in proportion to the advantages claimed for them, makes it possible, according to their devisers, to take a trial balance within an incredibly short time or to do away with trial balances altogether. As a matter of fact, satisfactory results can be obtained only by habits of accuracy and by proving the work done wherever possible. Some methods found useful in searching stubborn errors will be explained in this chapter.
Ledger Analysis.—By ledger analysis is meant an analysis of postings classified according to the books of original entry, i.e., on the basis of all journals whose record is transferred to the ledger. The process of making such an analysis is somewhat as follows: The ledger must be gone through carefully and for each account the last debit and credit figures which entered into the last correct trial balance must be marked distinctly so as not to be included in the analysis. If the analysis is for an interim period, the first debit and credit items belonging to the next period should be marked in a similar way, as shown in the illustration ([Form 46]). This must be done very carefully as the “date” is not always a safe guide. The use of subsidiary journals with one summary posting to offset many detailed contra postings and inaccurate dating of the summary posting, often make the “date” an uncertain guide. Care should therefore be exercised so that the points marked include a complete, i.e., a debit and credit, posting of every journal.
