Bank Reconciliation Each month the bank sends its depositors a bank statement. This statement reports the activity that has taken place in a depositor's account during the past month. A bank statement contains the following information: 1. The depositor's balance at the beginning of the month. 2. A list of all deposits made during the month. 3. A list of all depositor's checks paid by the bank during the month. 4. A list of all other miscellaneous charges and credits to the depositor's account during the month (such as service charges or interest). 5. The depositor's balance at the end of the month. The bank statement should be compared to the depositor's records by someone who does not handle or account for cash. The bank statement and the accounting records are not normally in agreement, and the comparison is necessary to determine the accuracy of the two rec-ords. This comparison, termed a bank reconciliation, starts from two different amounts: the end-of-the-month bank statement balance and the end-of-the-month balance on the depositor's books. The major reason for the discrepancy between the two records is due to the time lag between the time a check is written by the business and when it is finally paid by the depositor's bank. That is, a check is written and sent to a creditor, the creditor deposits the check in its bank account, and the creditor's bank then forwards the check to the depositor's bank for payment. This process may take up to two weeks, depending on the proximity of the two companies and their banks. The purposes of a bank reconciliation are to determine: (1) if there are errors to be corrected and (2) the amount of cash that a company has control over at the end of the month. The corrected total is the amount that will be reported on the company's balance sheet. A bank reconciliation computes the corrected cash balance as illustrated in Exhibit. The amounts to be recorded in each of the sections of the bank reconciliation are determined by comparing the accounting records with the bank statement. The following steps should be taken in the reconciliation: 1. Compare the deposits listed on the bank statement with those in the accounting records. 2. Compare the amounts of the individual checks listed on the bank statement with the amounts recorded in the accounting records. 3. Review the bank statement for any other deductions (debit memos) or additions (credit memos) not recorded in the accounting records.' The following example for the Jordan Company illustrates the preparation of a bank reconciliation for the month of November 1992: 1. Balance on company records (11/30/92), $12,451.00 2. Balance per bank statement (11/30/92), $12,094.17 3. Customer NSF check returned with bank statement, $624.25 4. A deposit mailed on November 28, 1992, did not appear on the bank statement, $1,347.80 5. The following disbursement checks were outstanding at the end of the month: 6. The monthly service charge not recorded on the company rec-ords, $25.00 7. A note receivable collected by the bank, $500.00 8. Interest on the above note collected by the bank, $10.00 9. Interest earned by Jordan on the funds deposited in the bank,$51.67 Exhibit illustrates the preparation of a bank reconciliation statement from the above data.