But this is not the case as the bank does not clear an NFS cheque.Īs a result, the cash on hand balance gets reduced. This is because when you deposit a cheque in your bank account, you consider that the cheque has been cleared by the bank. NSF cheques are an item to be reconciled while preparing the bank reconciliation statement. This is because there are insufficient funds in the associated bank account to make a purchase. In addition to this, the NSF may also refer to a situation where an individual intends to purchase with a credit card but is unable to do so. This is because the current account on which the cheque is drawn does not have sufficient funds to honour the cheque. Not Sufficient Funds (NSF) refers to a situation when your bank does not honour your cheque.
Such a difference needs to be adjusted in your cash book before preparing the bank reconciliation statement. It is important to note that such charges are not recorded by you as a business till the time your bank provides you with the bank statement at the end of every month.Īs a result, the balance as per the bank statement is lower than the balance as per the cash book. This reduces your bank balance as reflected in your bank statement. These bank charges are charged to your account directly. In addition to the maintenance fees, the bank charges a fee in respect of other specific transactions. Such fees are charged to maintain your account with the bank.
Bank Service ChargeĪ bank charges various types of fees to you as an account holder. These outstanding deposits must be deducted from the balance as per the cash book in the bank reconciliation statement. This means that the balance as per the cash book is greater than the balance as per the passbook until the time the bank processes the deposit. Your business records the increase in bank balance in its books of accounts the moment it deposits cash or cheque in its bank account. This happens due to the time lag between when your business deposits cash or a cheque into its bank account and when your bank credits the same. Such deposits are not showcased in the bank statement on the reconciliation date.
Such insights would help you as a business to control cash receipts and payments in a better way.īank Reconciliation Terminology Deposits in Transitĭeposits in transit are also referred to as outstanding deposits.
In addition to ensuring correct cash records, the bank reconciliation process also helps in keeping track of the occurrence of any form of fraud. This may result in bounced cheques or overdraft fees. In the absence of proper bank reconciliation, the cash balances in your bank accounts could be much lower than the expected level. This is because reconciling the cash book with the passbook at regular intervals ensures that your business’s cash records are correct. Therefore, the bank reconciliation process should be carried out at regular intervals for all of your bank accounts. Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can make the necessary corrections in your books of accounts to ensure accuracy. Reconciling bank statements with cash book balances helps you, as a business, to know the underlying causes that lead to such differences. Such a process determines the differences between the balances as per the cash book and bank passbook. Bank reconciliation is the process of matching the bank balances reflected in the cash book of a business with the balances reflected in the bank statement of the business in a given period.
0 kommentar(er)
