ReconciledrillBank errors
A bank error is a mistake made by the bank, such as charging another customer's check to your account or recording a deposit for the wrong amount. Adjust the bank side of the reconciliation in the direction that corrects the statement, post no journal entry, and notify the bank so the item clears next month.
Syntax
Bank side: add back wrongful charges or short credits; subtract wrongful credits or overstated deposits. No journal entry.| Part | What it is |
|---|---|
Wrong check charged | Add back on the bank side |
Check cleared for more than written | Add the difference on the bank side |
Check cleared for less than written | Subtract the difference on the bank side |
Deposit credited short | Add the shortfall on the bank side |
Examples
Statement balance 4,000; bank charged a 350 check belonging to another companyResult: Adjusted bank balance 4,350. No entry; the bank reverses the 350 next month.
Check #77 written and recorded for 520; bank cleared it as 250Result: Bank error 270 (the bank took too little). Subtract 270 on the bank side; the bank will correct it, or the payee will claim the shortfall.
Deposit of 1,000 credited by the bank as 100Result: Add 900 on the bank side and ask the bank to credit the missing 900.
Common mistakes
- Posting a journal entry for a bank error: the books are right; only the statement is wrong.
- Confusing a bank error with a book error: compare the check as written (and recorded) with the amount the bank cleared; if the bank's figure differs from the physical check, the bank erred.
- Dropping the item next month without checking: keep it on the bank side until the correction appears on a statement.
Practice Bank errors
These drills check your answer on live data, free, no account needed.
- Not our checkClassify every line, enter the correction for any error, then the adjusted bank and book balances.
- Errors on both sidesClassify every line, enter the correction for any error, then the adjusted bank and book balances.
Questions
How do I know if an error is the bank's or mine?
Look at the source document. If the check image shows 520 and the bank cleared 250, it is the bank's error. If the check shows 250 and the books say 520, it is a book error.
Does a bank error need a journal entry?
No. The company's records are already correct. Report it to the bank and carry it on the bank side until fixed.
Related
- Book errorsA book error is a company mistake in recording cash: a check entered for the wrong amount or a deposit recorded twice. Adjust the book side and correct it.
- Adjusted bank balanceAdjusted bank balance = statement balance + deposits in transit - outstanding checks, plus or minus bank errors. Worked examples with exact results.
- Reconciliation does not balanceWhen the adjusted bank and book balances differ, the difference tells you where to look: divisible by 9 means a transposition, twice an item means a sign.