Bank Reconciliation
Definition: Matching book balance to bank statement
Scope:ModerateDifficulty:Easy
Matching book balance to bank statement
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record bank service charge | ||
| Bank statement shows $25 service fee not yet recorded. | ||
| Bank Charges ExpenseExpense+ | $25 | |
| CashAsset− | $25 | |
| Book balance adjusted to match bank. | ||
| 2. Record interest earned | ||
| Bank credited $12 interest not yet recorded. | ||
| CashAsset+ | $12 | |
| Interest RevenueRevenue+ | $12 | |
| Book balance increases to match bank. | ||
| 3. Record NSF check | ||
| Customer’s $350 check bounced. | ||
| Accounts ReceivableAsset+ | $350 | |
| CashAsset− | $350 | |
| Receivable reinstated; cash reduced. Customer still owes. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Bank Charges ExpenseBank Charges ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$25.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$25.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$12.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$25.00
$350.00
$363.00
Interest RevenueInterest RevenueRevenueIncome earned from business operations. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12.00
Normal bal. ▶
$12.00
Accounts ReceivableAsset account — amounts owed by customers. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$350.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$350.00
DurationN/A
External Links
- Bank reconciliation — Wikipedia