Differences – But Why?
Bank reconciliation process is targeted to validate the bank balance in the general ledger and explain the difference between the bank balance shown in an organization's bank statement. Learn the reasons for existence of differences between the two.
Reason for Differences:
Such differences may occur, for example, due to following reasons:
1. Cheques Not Presented: A cheque or a list of cheques issued by the organization has not been presented to the bank.
2. Banking Transactions: A banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organization's books.
3. Errors: Either the bank or the organization itself has made an error while recording transactions.
4. Deposit in transit: Cash and/or checks that have been received and recorded by an entity, but which have not yet been recorded in the records of the bank where the entity deposits the funds.
5. NSF check: A check that was not honored by the bank of the entity issuing the check, on the grounds that the entity's bank account does not contain sufficient funds. NSF is an acronym for "not sufficient funds."
Summary:
Differences may occur, between bank statement and bank account in your ledger. Some examples are following:
- Cheques not presented
- Banking transactions & charges
- Errors
- Deposit in transit
- NSF check
Related Links
You May Also Like
-
Many different accounts are used in finance. Understand the representation and nature of clearing account in context of accounting, finance and ERP Systems.
-
The Cash Clearing process enables you to track amounts that have actually cleared your bank. Till reconciliation happens the amounts are parked in 'Cash Clearing Account'.
-
Disbursement Float is the time taken from payment creation to settlement. Collection float is the sum total of time taken by Payment Float; Mail Float; Processing Float and Availability Float. Learn more!
-
Collection Float is the time spent to collect receivables. Collection float is the sum total of time taken by Invoice Float; Mail Float; Processing Float and Availability Float. Explore more!
-
Bank reconciliation process is targeted to validate the bank balance in the general ledger and explain the difference between the bank balance shown in an organization's bank statement. Learn the reasons for existence of differences between the two.
-
The Cash Management component ensures that the enterprise has sufficient liquidity for payments that are due and to monitor payment flows. Learn how treasury plays an important role in cash management for the enterprise.
-
Account Reconciliation – How? Learn the three key attributes to perfom account reconciliation.
-
The objective of funding Management is to implement strategies that lead to the best borrowing rates and lower investment costs. Learn how treasury aids in loans and investment management functions.
-
Treasury has increasingly become a strategic business partner across all areas of the business, adding value to the operating divisions of the company. Managing activities that were traditionally carried out within the general finance function. Learn about the drivers for this change.
-
Treasury Management - Benefits
Effectively using treasury management with cash management and trade finance products brings tangible benefits to both corporates and financial institutions. Let us discuss some tangible benefits of treasury function.
