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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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(Appendix 6. 7) What is a bank reconciliation? List the causes of the difference between the cash balance listed on a company’s bank statement and the balance shown in the company’s cash account.

To determine

Explain the term bank reconciliation and also list out the causes that bring out the difference between the book and bank cash balance.

Explanation

Bank reconciliation:

Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

The most common reasons that bring out the difference between the book and bank cash balance are as follows:

  • Deposit in transit refers to the deposits that have not been reached or recorded by the bank before the statement is being prepared.
  • Outstanding checks are the checks that are issued by the depositor but not presented to the bank for payment before the statement is prepared...

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