Financial Accounting Terms Dictionary

U.S. GAAP Codification IFRS International Standards Accounting Topics


Financial Accounting Terms
Bank Reconciliation


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Bank Reconciliation
  

Bank reconciliation

Correct balance of the deposit account
   = balance from bank statement
   + deposits in transit
   - outstanding checks
  
Correct balance of the deposit account
   = book balance
   + deposits not reflected in the book
   - not sufficient funds (NSF) checks
   - bank service charges
   

Deposits in transit

An example
 
Deposit checks were sent to the bank, but not reflected on the bank statement yet
Deposits in transit are added to the balance from bank statement to get correct balance of deposit
 

Outstanding checks

An example
 
Checks were issued by the company, but not paid by the bank yet
Outstanding checks are deducted from the bank statement balance to get correct balance of deposit
 

Deposits not reflected in the book

An example
 
Deposits were reflected on the bank statement, but the company was not aware of the deposits yet
Such deposits are added to the book balance to get correct balance of deposit
 

Not sufficient funds (NSF) checks

An example
 
If the bank account of the check issuer does not have sufficient funds to pay the check amount, such checks are called not sufficient funds (NSF) checks
 
Not sufficient funds checks are deducted from the book balance to get correct balance of deposit
 

Bank service charges

Bank service charges are deducted from the book balance to get correct balance of deposit
 


      


 
 

An example of bank reconciliation

 

Balance from bank statement

$510,000

Book balance of bank deposit

$520,000

Deposits in transit

$20,000

Outstanding checks

$30,000

Deposits not reflected in the book

$10,000

Not sufficient funds checks

$25,000

Bank service charges

$5,000


 
Bank reconciliation
   
Correct balance of the deposit account
   = balance from bank statement
   + deposits in transit
    - outstanding checks
  
   = $510,000 + $20,000 - $30,000
   = $500,000
  
Correct balance of the deposit account
   = book balance
   + deposits not reflected in the book
    - not sufficient funds (NSF) checks
    - bank service charges
  
   = $520,000 + $10,000 - $25,000 - $5,000
   = $500,000
  

Another example of bank reconciliation

 

Balance from bank statement

$360,000

Book balance of bank deposit

$359,000

Deposits in transit

$5,000

Outstanding checks

$9,000

Deposits not reflected in the book

$6,000

Not sufficient funds checks

$8,000

Bank service charges

$1,000


 
Bank reconciliation
   
Correct balance of the deposit account
   = balance from bank statement
   + deposits in transit
    - outstanding checks
  
   = $360,000 + $5,000 - $9,000
   = $356,000
  
Correct balance of the deposit account
   = book balance
   + deposits not reflected in the book
    - not sufficient funds (NSF) checks
    - bank service charges
  
   = $359,000 + $6,000 - $8,000 - $1,000
   = $356,000
  

        





U.S. GAAP by Codification Topic 
 
 105  GAAP Hierarchy 
 105  GAAP History 

 205  Presentation of Financial Statements 
 205-20 Discontinued Operations 
 210  Balance Sheet 
 210-20 Offsetting 
 220  Comprehensive Income 
 225  Income Statement 
 225-20 Extraordinary and Unusual Items 
 230  Statement of Cash Flows 
 250  Accounting Changes and Error Corrections 
 260  Earnings per Share 
 270  Interim Reporting
 
 310  Impairment of a Loan
 320  Investment Securities 
 320  Other-Than-Temporary Impairments, FSP FAS 115-2 
 320-10-05 Overview of Investments in Other Entities 
 320-10-35 Reclassification of Investments in Securities
 323-10 Equity Method Investments
 323-30 Investments in Partnerships and Joint Ventures 
 325-20 Cost Method Investments 
 330  Inventory

 340-20 Capitalized Advertising Costs 
 350-20 Goodwill 
 350-30 Intangibles Other than Goodwill 
 350-40 Internal-Use Software 
 350-50 Website Development Costs 
 360  Property, Plant and Equipment
 360-20 Real Estate Sales 
 
 410  Asset Retirement and Environmental Obligations 
 420  Exit or Disposal Cost Obligations 
 450  Contingencies 
 450-20 Loss Contingencies 
 450-30 Gain Contingencies
 480  Redeemable Financial Instruments 

 505-20 Stock Dividends, Stock Splits 
 505-30 Treasury Stock 

 605  SEC Staff Accounting Bulletin, Topic 13 
 605-25 Revenue Recognition - Multiple Element Arrangements 
 
 715-30 Defined Benefit Plans - Pension
 718  Share-Based Payment 
 730  Research and Development 
 730-20 Research and Development Arrangements 

 805  Business Combinations  
 810  Consolidation 
 810  Noncontrolling Interests 
 810  Consolidation of Variable Interest Entities, SFAS 167 
 
 815  Derivatives and Hedging Overview 

 820  Fair Value Measurements  
 820  Fair value when the markets are not active, FSP FAS 157-4
 825  Fair Value Option 

 830  Foreign Currency Matters 
 830-20 Foreign Currency Transactions 
 830-30 Translation of Financial Statements 
 835  Interest 
 835-20 Capitalization of Interest 
 835-30 Imputation of Interest 

 840  Leases 
 840-20 Operating Leases 
 840-30 Capital Leases 
 840-40 Sale-Leaseback Transactions
 845  Nonmonetary Transactions 

 855  Subsequent Events 
 860-20 Sale of Financial Assets, SFAS 166 
 860-50 Servicing Assets and Liabilities, SFAS 156 

 985-20 Costs of software to be sold  

 



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