Bank Reconciliation definitions Flashcards
Bank Reconciliation definitions
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Bank Reconciliation Process of comparing a company's records with the bank statement to identify and adjust for timing differences and errors. Deposits in Transit Cash receipts recorded by the company but not yet processed or cleared by the bank at the statement date. Outstanding Checks Checks issued and recorded by the company but not yet cleared or deducted by the bank. Bank Errors Mistakes made by the bank in recording transactions, requiring correction to reflect the accurate account balance. Book Errors Mistakes in the company's accounting records that must be identified and corrected during reconciliation. Bank Collections Funds collected by the bank on behalf of the company, often without prior notice, increasing the book balance. Electronic Funds Transfer Automatic movement of money into or out of the company's account, such as direct deposits or payments. Service Charges Fees imposed by the bank for account maintenance or transactions, reducing the company's book balance. Interest Revenue Earnings credited by the bank to the company's account for holding funds, increasing the book balance. NSF Checks Customer checks deposited by the company that are returned unpaid due to insufficient funds in the payer's account. Adjusted Balance Final reconciled cash amount that matches both the bank statement and company records after all adjustments. Internal Control Procedures and policies, such as reconciliations, designed to safeguard assets and ensure accurate financial records. Time Lag Delay between recording transactions in company books and their appearance on the bank statement. Cash Most liquid asset, easily accessible and susceptible to theft, requiring strong controls like reconciliations.
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