Lesson details
- Estimated study time
- 1 hr 30 min
Learning objectives (9)
Ask which record is waiting
A deposit in transit and an outstanding check are already correct in the entity's ledger. The bank has not posted them, so they adjust the bank side and create no new entry. A returned customer check and a service charge are already on the bank statement. They adjust the book side because the entity has not yet recorded them.
Apply one control to each item: identify the event, identify who recorded it, and identify the evidence that the other record is waiting for. Put an error on the side of the party that made it. Do not use the item's sign as the sorting rule.
Require two equal totals and the entries
Add deposits in transit to the bank balance and subtract outstanding checks. Add or subtract bank-reported transactions from the ledger balance according to their economic effect. Both sides must reach the same supported amount. Then record only the book-side transactions.
A returned customer check normally debits Accounts Receivable and credits Cash. A service charge normally debits an expense and credits Cash. Investigate old checks, deposits that remain in transit, unknown withdrawals, and any residual; do not carry them forward as a balancing amount.
Control limit
Agreement between the two sides proves only that the listed reconciling items produce the same endpoint. More evidence is required for ownership, completeness across other accounts, restriction classification, and fraud risk.